AGC Contracts are Reborn

Nov 1, 2007 12:00 PM, By Tom Zind, Freelance Writer

Collaborative effort yields construction contracts designed to head off disputes and streamline projects through inclusion of best practices

It might not be a “Kumbaya, all-join-hands” moment, but a construction contract signing session in your future could send everyone away from the table effusing a new spirit of camaraderie and trust. In fact, a new set of contract documents, collaboratively designed to reflect the interests of all parties, establish a more level playing field for all, and yield better overall projects, is being touted as a harbinger of important change in the construction industry.

Dubbed ConsensusDOCs because they were drafted by Associated General Contractors (AGC) and a coalition of trade associations representing “DOCS” — designers, owners, contractors, subcontractors, sureties, and other stakeholders — the voluntary documents define and assign the rights, responsibilities, and risks of everyone involved based on “industry best practices.” Endorsed by some 20 groups, they're seen as an improvement over existing AGC standard documents and a fresh alternative to widely used standard documents from the American Institute of Architects (AIA) and a raft of often-problematic proprietary documents.

While only one of many groups whose voices were heard in the three-year ConsensusDOCS drafting project, subcontractors stand to see some noteworthy gains. Provisions in one group of six that incorporate more than 70 new documents (available for viewing at www.consensudocs.org/catalog) are recognized as offering better protection for subcontractors than those in most proprietary contracts in use today by contractors. Numbering 13 in all, including the ConsensusDOCS 750 standard form of agreement between contractor and subcontractor, the subcontracting documents contain a variety of equitable terms for subcontractors in the areas of risk exposure, timely payments, and retainage reduction.

“What we're doing with these new documents is getting back to developing an environment of trust and more equitable sharing of risks across a project,” says D.L. Smith, the retired founder of Topeka, Kan.-based D.L. Smith Electrical Construction, Inc., who monitored the ConsensusDOCS process as the National Electrical Contractors Association (NECA) trustee to Associated Specialty Contractors (ASC), which had a seat at the negotiating table. “Over time, contracts have passed more risk down the line to subcontractors, but these new documents alleviate some of that and spread risk more equally. From general conditions and insurance to substantial and final completion terms and final payment terms, the language in the new documents adds up to a major gain for the industry.”

Less time for conflict

But fair and balanced terms for electrical contractors and other subcontractors are merely a byproduct of a broader effort to design contracts that meet changing construction demands and realities.

AGC spearheaded the ConsensusDOCS initiative because it saw its own and other standard contracts (often packed with amendments and modifications designed to offload risk and protect narrow but powerful interests) as counterproductive to overall project success. AGC's goal was to collaboratively develop a new set of contracts that addressed such issues up-front, freeing up parties to focus more on positive project outcomes and less on watching their backs.

The new documents, which AGC will substitute for contract documents it previously developed and published, were unveiled on September 28. Their use, however, will be strictly voluntary. It will be up to lead parties such as project owners and general contractors to determine whether or not ConsensusDOCS offer a better option. Nevertheless, AGC and the groups it worked with to fashion the new contract documents are strongly encouraging their use. Arguing that the changing nature of construction demands more collaboration and less squabbling over contract terms among parties, these parties say ConsensusDOCS lays the groundwork for smoother projects and greater protection of all interests. Because of the breadth of trade association input, drafters say parties can have a measure of confidence that the contracts have most of their legitimate interests covered.

That's the assessment of one of the groups that collaborated on ConsensusDOCS: the American Subcontractors Association (ASA). In ASA's view, ConsensusDOCS offer subcontractors and other parties a way to sidestep contentious issues that often come up in the course of a project. By defusing disputes with binding language that more clearly sets out parameters of risks and rights, the contracts establish a new “gold standard” for contracts by helping set the stage for parties focusing on the project first and foremost, says E. Colette Nelson, ASA executive vice president.

“These documents encourage practices that are in the best interest of all parties to a project rather than merely reflecting existing unfair business practices and industry trends,” she says.

AGC's Chief Executive Officer, Stephen Sandherr, goes a step further, characterizing the collaborative effort to redesign construction contracts as a watershed event in the history of the construction industry.

“The release of ConsensusDOCS is one of the most significant industry developments in the last 20 years,” Sandherr says. “We believe this effort will positively transform the industry's use of standard contract documents.”