Contracts Can Make or Break a Project
ConsensusDocs Can Help
Does Your Contract Facilitate
Project Success?
“It is ironic that the one industry in the country,
which more than all others depends upon
coordination, cooperation and teamwork
among multiple participants should be the
country’s most adversarial industry.”
- Construction Industry Institute (CII)
Why Contracts Matter to
Project Results
• Canadian Study: 8 bad clauses can increase price by 20%
• Construction Industry Institute (CII) Study:
− Unnecessary risk contingencies
− Best Owners seek best Contractors and vice versa
− Worst contracts get worst results
What are the most important
provisions in a contract?
• Parties’ Information
• Description of Work/Services
• Indemnification
• Warranties
• Dispute Mitigation/Resolution
Answer: All of the above and more – depends on
whether you encounter an issue
Proper Risk Allocation is Key
The party in the best position to manage the risk
should have the responsibility to do so.
Einstein’s Rule…
“…the definition of INSANITY is doing the same thing,
over and over again, and expecting different results.”
Why Consensus is Needed
• Perception of Bias - Favors interests of drafter
• Lack of Agreement on Basic Terms Modifications exceed the original “standard”
• Unfair Risk Allocation - Parties try to push risk
away (usually downstream) rather than manage
• Industry Trending Towards Collaboration Win/Win versus Win/Lose
Better Project Results = Future Business
Contracts Negotiation Strategy
• Contracts should memorialize a business
relationship (not a declaration of war)
• A contract should clearly express the parties’
intentions – obligations, rights and responsibilities
• Project success is a win for all
• An unsuccessful project is usually a failure for all
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Can you afford to continuing working with
outdated, one-sided contracts?
Proven Results for State of Iowa
Iowa DAS using AIA v. ConsensusDocs
Using AIA
Using CDs
68 project/year
98 projects/year
$40M/ year
$80M/year
Claim(s) on
EVERY PROJECT
NO formal claims on
$400+M in construction
The ConsensusDocs Coalition
40+ Leading Design and Construction Industry Associations
Contract Drafting Principles
• Equal Votes for All Coalition Members
• Consensus Process
• Align Owner Interests with the Project Team
• Balanced Risk Allocation
• Industry Best Practices and Trends
View the ConsensusDocs Procedures at
www.consensusdocs.org/procedures
Contract Drafting Principles
Best Practices + Fair Risk Allocation = Better Projects
• Reduce Costs, Contingencies, Inefficiencies
• Communication and Collaboration
• Empower Owners
• Avoid Legalese, whenever possible
• Change from Zero-Sum to Win-Win
Fair Contracts Save You Time and Money!
What’s Up Docs?
• 42 coalition members = 110% increase
• More Design Professional input
− CSI, EJCDC, AIA (insurance), DBIA
• Double digit growth despite down economy
• 100+ standard contracts & administrative forms
• Industry firsts: IPD, BIM, Federal Subcontract,
Green, Federal Design-Build, Subsubcontract,
Commissioning
New in 2015 (so far)
749 - Constructor & Hazardous Materials Testing
Laboratory
850 - Owner & Trade Contractor Agreement
(CM is Owner’s Agent)
840 – Owner & Design Professional CM Agency
(Owner Hires or Acts as Own CM) – to be
released in July 2015
100+ Contracts
• 200 Series – General Contracting
• 300 Series – Collaborative
• 400 Series – Design-Build
• 500 Series – Construction Management
• 700 Series – Subcontracting
• 800 Series – Program Management
Agreement Structure
ConsensusDocs
• One integrated document
includes both the general
conditions and agreement
• Written in precise and
understandable language
AIA
• A201 is a separate general
conditions document can cause confusion and
conflicts
• Same general conditions
used for D-B-B, D-B and
CM/GC
Scope of the Work
and Order of Precedence
ConsensusDocs
AIA
• Provides order for
interpreting conflicting
documents
• Golden Rule: He who
has the gold, makes the
rules.
• Change Orders =
highest precedence
• Makes Constructors
mind-readers by have
to intuit “intended
results”
• Avoids litigation costs
Communications
• A/E is not a default funnel for all communications –
avoid communication silos
• Transmitting contract documents in electronic form –
Electronic Communications Protocol
Retainage
AIA
ConsensusDocs
•
•
Once the entire work is 50%
complete, Owner may not withhold
additional retainage and shall pay
Contractor the full amount of what is
due on account of progress
payments (9.2.4.1)
Owner may release retainage for
work of early finishing trades and
subcontractors upon Owner’s
acceptance of their work (9.2.4.3)
•
Even upon substantial completion of
the entire work of the project, Owner
may limit release of retainage to
designated portions of work that are
substantially complete(9.8.5)
•
Result: Owner may withhold
retainage as to early work that has
been accepted, e.g., early finishing
trades and subcontractor work, until
substantial completion of the entire
work of the project
Dispute Mitigation and Resolution
• Dispute mitigation and resolution before escalation
• Direct communication to avoid claims and build
positive working relationships
• Optional Project Neutral or Dispute Review Board (DRB)
• Parties decide - Arbitrate or Litigate
− Current AAA rules for arbitration
− Non-prevailing party pays, including legal fees
Collaboration Technology Platform
• 24/7 Access
®
• MS Word Editing
• Free Collaboration
• Version Control
• Redlined against
standard
• Create Favorites
• User Notes
• Convert & Compare
ConsensusDocs Guidebook
• Highlights potential issues and innovative clauses
• Associations’ comments provide issue-spotting,
specific language modifications and perspectives
Free download at
www.ConsensusDocs.org
Other “Free” Resources
• Articles
• Podcasts, Webinars & Audio Recordings
• Educational Use Copyright Licenses
• Content Counsel (NOT Legal Advice)
• Training Videos & Webinars
• User’s Guide & Quick Start Guide
• Legal Comparisons
• Testimonials &Project Histories
Coalition Member Organizations
Receive 20% Discount
on All Packages
at www.ConsensusDocs.org
Simply put…
ConsensusDocs Help YOU
Build A Better Way!
ConsensusDocs Support Team
support@consensusdocs.org
866-925-DOCS (3627)
www.consensusdocs.org