AGC Contracts are Reborn

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

Another important provision borrowed from AGC 650, Walter says, is limiting the scope of general contractors' ability to require lien waivers.

“Some of the more onerous contracts require unconditional lien waivers, under which subs effectively have to sign away all of their lien rights in order to get payment,” he says. “They state that by accepting an interim payment, subs agree to waive any current and future liens they might put on a project. The 750 allows lien waivers on only what's been paid for.”

Subcontractors also tally a win with new language that puts limits on the subcontractor's need to defend claims against other parties. This brings the former AGC “hold harmless” terms in line with AIA and Engineers Joint Contract Documents Committee contract language, according to Tom Barfield, a consultant to ASC who was active in the development of both ConsensusDOCS and the revision of AIA's contract documents.

Michael W. Smith, a project manager for Schaeffer Electric Co., an ASA board member who has followed the ConsensusDOCS process, says that and similar clauses help to bring more common sense and fairness back to the contracting process.

“Electrical contractors and other subs now won't be held liable for things we're not responsible for,” he says. “It says we're responsible for our actions and events we have control over. What so often happens is that it comes back to our insurance, and we ultimately take the hit, affecting our ability to get insurance in the future.”

Dawn of a new day?

Provisions in ConsensusDOCS that are favorable to subcontractors or that otherwise seek to level the playing field don't ensure the end of construction contract disputes. But by addressing combustible issues that have been known to flare into contentious, costly, and time-consuming legal battles, contract reformers have tried to build consensus among parties, clearing the air as much as possible before a project starts.

In a construction environment where projects increasingly employ design-build and building information modeling (BIM) approaches, cooperation and partnering is becoming more essential. In the assessment of some electrical contractor observers at least, ConsensusDOCS look to be another good vehicle for adapting to change in the construction world.

“These documents don't necessarily mean a power shift when it comes to drawing up contracts, but they do mean everyone has more of a voice and some aren't in the position of getting all the risks passed down to them,” says D.L. Smith. “Years ago, the partnering concept was big in construction. Hopefully, these documents can replicate that and have an even better effect.”

Michael Smith says the time has come for cooperatively designed contract documents that offer an alternative to contractor forms that simply invite clashes.

“There's been a lot more litigation on construction projects gone bad, and I think this will help deter that a bit and make owners, general contractors and subcontractors stand up to what's agreed upon in the documents,” he says. “Consensus is an apt term. We all need fair, win-win documents that allow us to go into projects with fewer concerns and believing that things that do come up will be dealt with fairly.”

Zind is a freelance writer based in Lee's Summit, Mo.

Sidebar: AIA Unveils Revised Contracts

The construction industry's oldest and most-used standard contracts have gotten a face-lift, incorporating some notable benefits for subcontractors. Following a three-year intensive review with major parties of interest, the American Institute of Architects (AIA) unveiled its latest 10-year refresh of standard contract documents on November 5.

For electrical contractors and others who work as subcontractors, changes to AIA's A401 subcontract offer many new benefits, according to Tom Barfield, a consultant to Associated Specialty Contractors (ASC), who helped ASC draft the new contracts.

However, they also impose more risk through inclusion of an additional insured requirement — albeit limited to losses caused in whole or in part by a subcontractor's negligent acts or omissions, he adds. Barfield maintains they are superior in some ways to the new ConsensusDOCS introduced in September by Associated General Contractors (AGC), which he also helped draft. For instance, A401 obligates contractors to furnish all temporary facilities to subcontractors at no cost, except as specifically noted, Barfield says. By contrast, such services must be noted in detail in a separate exhibit in the ConsensusDOCS 750 subcontract.

“This may result in many of the myriad services not being addressed,” he says.

Owners also have more obligations to subcontractors in the new A401. They now have the option of facilitating payment to subcontractors, including the use of joint checks, Barfield says. Subcontract assignments to owners when a contractor is dismissed, he adds, require that the owner accept all of the original contractor's obligations, even after a replacement contractor is engaged.

However, Barfield says that ConsensusDOCS 750 gives subcontractors more power than A401 to request project financing information from owners and their lenders, and it entitles them to an equitable adjustment in contract amount and time for contractor changes in the timing, order, or priority of subcontract work. It also makes additional insured an option rather than a requirement, offers Owners' and Contractors' Protective Liability (OCP) as an alternative, and limits a subcontractor's liability to the extent of losses caused by its negligence.

Although both contracts are worthy documents that “provide subcontractors valuable benchmarks in negotiating equitable terms with subcontractors,” Barfield says, A401 rates better. Why? It's more versatile, he says.

“The A401 includes the sub-friendly terms of the A201 general contract's general conditions by reference, whereas the 750 does not include the terms in the ConsensusDOCS 200 general contract,” he says. “Hence, important Consensus 200 terms are ordinarily lost when another general contract form applies.”