Changes to ConsensusDocsConstruction Contracts: What ...media.straffordpub.com/products/changes-to... · •Fair works (get best contractors at their best prices) •Best practices

Changes to ConsensusDocs Construction

Contracts: What Lawyers Need to KnowDefault for Builder's Risk, Indemnification, Notice, Payment,

Dispute Mitigation and Resolution, and Bond Penal Sum

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1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.

TUESDAY, FEBRUARY 26, 2019

Presenting a live 90-minute webinar with interactive Q&A

Ronald D. Ciotti, Partner, Hinckley Allen & Snyder, Manchester, N.H.

Brian Perlberg, Senior Counsel, AGC of America and ConsensusDocs, Arlington, Va.

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www.consensusdocs.org | [email protected] | 866.925.DOCS (3627)

Leveraging the New ConsensusDocs Construction Contracts

Ron Ciotti, Esq.Hinkley [email protected]

5

Brian Perlberg, ConsensusDocs Executive Director AGC Senior Counsel703.837.5318 [email protected]

Why CDs? Inefficiency Struggles for Construction

www.consensusdocs.org | [email protected] | 866.925.DOCS (3627)6

• 5 EXCULPATORY CLAUSES INCREASES PRICE 8-20% • Site Conditions• Delays• Liquidated Damages• Indemnification • Sufficiency of Contract Docs

• Construction Industry Institute (CII) Study on contracts• Unnecessary Risk Contingencies• Best Contractors Seek the Best Owners • Worst contracts get worse results.

What Poor Contract Forms Can Do to Project Results


8www.consensusdocs.org | [email protected] | 866.925.DOCS (3627)

The ConsensusDocs Coalition40 Construction Industry Associations

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ConsensusDocs 10+ Years

$1,000,000+ In donated free educational licenses.

11Years in business.

100+ Standard contract documents.

40Leading construction associations participating in the Coalition.

3,000+Subscribers.

1 GoalImprove the design and construction industry with best practice contracts that are fair to all parties.

4,000+Registrants in the ConsensusDocs Technology Platform.

DownloadA free sample!

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100+ Contracts

• 200 Series – General

Contracting

• 300 Series – Collaborative

• 400 Series – Design-Build

• 500 Series – Construction Management

• 700 Series – Subcontracting

• 800 Series – Program

Management

10www.consensusdocs.org | [email protected] | 866.925.DOCS (3627)10

• Active Owner vs passive + A/E authority matches responsibility

• Direct and positive communications rather than contractual silos

• Clearly written w/ integrated general conditions vs. legalese

• Track record = less reported case law + better project results • Fair works (get best contractors at their best prices)

• Best practices and industry firsts • IPD, IPD’ish, BIM, Lean, Design-Assist, Green, project financial

• Updated more often than once per decade.


Top Advantages with ConsensusDocs Standard Contracts

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“Refinements addressing changes in case law, the

insurance market, technological advances, and terminology

refinements are being published”


5 Year Update Published Dec. 7th

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ConsensusDocs 200 – Owner/Constructor Agreement & Gen. Cond. (2016)

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Payment- ConsensusDocs Improvements• Constructor is now paid in 15 Days instead of 20 Days

(CD 200 §9.2.1)

• No further retention at 50% project complete

• Retention now 150% vs 200% for final completion

• Owner, not A/E now approves payment app.

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Retainage


ConsensusDocs 200 AIA 201

Once the entire work is 50% complete, Owner may not withhold additional retainage and shall pay Constructor the full amount of what is due on account of progress payments (9.2.4.1)

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)

Owner may release retainage for work of early finishing trades and subcontractors upon Owner’s acceptance of their work (9.2.4.3)

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

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Project Financing Info

• Failure to provide = Stop Work

• CD 290 and 290.1 financial questionnaire

• Beware of creating confusing standards to demonstrate what part of the of work is impacted.



Termination for Convenience

• Includes demobilization costs, insurance proceeds, and now reasonable attorney’s fees

• A Premium for Prime Agreement

• Subcontractors get lost profits for unperformed work (CD 750, §10.4).

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Termination for Cause – Going Nuclear

• First notice is 7 days, second notice is now 3 days

• Improper termination for cause no longer automatically converts to a termination for convenience

• Use of terminated Constructor’s equipment requires written permission.

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• Now covers INTENTIONALY wrongful acts (CD 200 § 10.1 and 10.2)

• Indemnification doesn’t necessarily match insurance coverage (no insurance self sabotage).


Indemnification

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• Builder now buys Builder’s Risk policy instead of Owner CD 200 §10.3

• 50% cheaper• Constructor must factor this into its pricing • Procuring party is responsible for deductible and co-insurance• Owner can purchase and give notice so price isn’t included

• Risk of Loss is now upon the Constructor in 750 & 751 Subcontracts.

(See CD 9.2.12 CD 751 11.6.2 of 2014 edition eliminated)


Property Insurance, Builder’s Risk

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• Owner’s Liability Insurance and Business Income Insurance were both eliminated

• Pollution Liability Insurance (PLI) was added as a check-the-box option for projects

• Owner must provide owner info if it holds PLI

• ConsensusDocs insurance requirements in all agreements, including A/E 240, 245, and 420, provide detailed requirements with specific limits.


Insurance

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“both primary and excess of Constructor and its Subcontractors shall be primary and non-contributory to any insurance available to AI”

• Additional Insurance at CD 200 §10.4.1.

• Horizontal = excess policy isn’t triggered until all primary and excess is exhausted

• Vertical = downstream parties pay b/f upstream.


ConsensusDocs Insurance Vertical, Not Horizontal Exhaustion

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• ConsensusDocs recognizes that delegated design will be performed by more than one Sub and the General Contractor. The Architect of record has some design coordination responsibility

• PL insurance contains prior acts coverage with explicit self- insured retention maximum limits.


Design Delegation Professional Liability Insurance

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Interim Change, After giving notice, and Constructor stops work, Owner must now investigate and indicate if it agrees and provide written instructions through an interim directive

See CD 200 3.16.2


Differing Site Conditions

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• Interim Directive Changes now =“Interim Directive”

• Include written instructions that don’t necessarily impact time or money

• Payment of 50% of disputed amount = now based on invoices (not Constructor’s estimate)

• CD innovative provision on changes helping Constructor cash flow remains

• Changes are to be memoralized in 7 days.


“And Now for Something Different”ConsensusDocs Article 8 Changes

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• Notice by any effective means• Automatic acceptance via email

• Section moved from preamble to 13.5

• Except for Termination, Party’s address

• Compare to AIA A201 changes claim vs non claim.


Did You Notice the Revisions to Notice?

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• Mitigate through mandatory direct Party communications• Project Level• Management Level

• Optional Project Neutral or Dispute Review Board (DRB)• Must visit the site and make finding w/in 5 days

• Mediation is required

• Parties decide – Arbitrate or Litigate • Current AAA rules for arbitration• Non-Prevailing party pays, including legal fees.

ConsensusDocs Dispute Mitigation and Resolution


• JAMS listed as a provider

• Defaults to AAA rules and administration

• Party-selected rules + provider is now listed

• DRB language clarified not to coordinate with ConsensusDocs 200.5 DRB addendum.

• ConsensusDocs has a track record of billions of construction put in place while keeping you out of court.


ConsensusDocs Mediation

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• Bolded + Caps language clarifies Parties’ intent to arbitrate • Based on NJ case law

• AAA Fast track rules for $250,000 in total claims to save time and money

• Single day of hearing and complete in 45 days• AAA rules sets the threshold at $75,000

• AAA rules and admin is default

• ConsensusDocs has prevailing party attorneys fees for arbitration and litigation.


Arbitration

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Consequential Damages & Liquidated Damages• ConsensusDocs measures conseq. damages to Substantial

Completion AND Final Completion

• Waiver is partial so the parties meaningfully discuss.

• Consequential damages include:• Lost of income and profits

• Owner's loss of use of the Project

• Rental expenses

• Project financing

• Insolvency

• Reputation

• LDs should NOT be punitive (or are unenforceable).


Positive Contract Commandments Thou Shall Incentivize Performance

• Pair Liquidated Damages = Incentives to Constructors

• Example of ConsensusDocs Incentives language in the Guidebook:

6.7 AWARD INCENTIVE. The maximum amount of incentive shall be ________. To receive an incentive award based upon early completion, the Constructor must provide the Owner a written no tice of its intent to achieve completion early no later than 60 days prior to the contract date of Substantial Completion. If achieved, the Contract Price shall be adjusted by Change Order to reflect the Constructor's incentive award. Incentive award payment will be made upon receipt of a proper application for final payment after execution of that Change Order.


No automatic increase in penal sum after 10% increase in contract price

CD 200 §10.6.


Bond-Penal Sum

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Basic requirements of CPM schedule now required contractually CD 200 §8.3.4.


Schedule

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• Design Professional must provide construction documents that provide all necessary info to bid and build the project

• Does not include fiduciary duty “covenants” or further the interest language

• Beware of design-build docs that include contractually created fiduciary duty.


ConsensusDocs 240/245 Architect Agreements

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Subcontract Forms 750, 751, 752, 450, 455

• Pay-when-Paid

• Prompt pay

• No unconditional lien waivers

• Balanced indemnity provision

• If conflicts arise Subcontract Documents govern

• Optional AI or OCP.


• Added, “Losses, expenses, or damages to the extent not compensated by insurance or otherwise, and the cost of corrective work before expiration of the one-year period following the Date of Substantial Completion, provided that such losses, expenses, damages, or corrective work did not arise from Constructor’s negligence.” CD 235, 8.12

• Language in ConsensusDocs 235, 410, 500.


Cost of the Work, Corrective Work

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Samples and Tools

• Download a sample by registering

at

www.consensusdocs.org/sample.

• Download our Standardized

Contracts: Streamlining Projects in

Today’s Fast-Paced Construction

Market white paper here.


• Working Groups for new documents

• Lean Addendum and Design-Assist just published

• Master Subcontracts

• Prefab

• Residential

• Federal Purchase order


Outlook

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Microsoft Word

Version control

Document Comparison

Make Favorites

Finalize Documents


Project Dashboard:

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Proven Results for St of Iowa

Iowa DAS’ using AIA vs ConsensusDocs

Using AIA Using CDs

68 project/year 98 projects/year

$40M/ year $80M/year

Claim/s on EVERY PROJECT NO Formal CLAIMS on over $400M inconstruction


Leveraging the New ConsensusDocs Contracts

Questions?? Ron Ciotti, Esq.Hinkley [email protected]

Brian Perlberg, ConsensusDocs Executive Director AGC Senior Counsel703.837.5318 [email protected]
