Today’s Guest Post is by Nathan B. Hinch, an associate at Mueller & Reece, LLC in Bloomington, Illinois, concentrating in the practice of commercial, construction, environmental, and real estate law. He can be reached at email@example.com and on twitter @NathanHinch.
Form Construction Contracts – How Do They Compare, and How Should They Be Used?
By Nathan B. Hinch
Imagine that you are a contractor from the mythical State of Verbalville, a land where the handshake deal is the norm and no one ever puts anything in writing. If a developer/owner awarded you a project and asked you to sign an AIA Document A101™ form construction contract, along with AIA Document A201™ General Conditions, would you sign it without reading the document? Of course not. Assuming that you were willing to consider bucking the verbal trend and sign the document at all, you would likely read it over very carefully first. You might also consult an attorney, to help you understand the potential risks and liability issues involved with the contract, including the enforceability of the contract under Verbalville State law, and suggest changes to the document.
Now imagine that you are a contractor in my home State of Illinois and are awarded a project in North Carolina. If the developer/owner handed you a ConsensusDOCS® 200 form construction contract with general conditions and asked you to sign, would you do so without reading it? Would you consult a professional attorney before signing? What if you were familiar with the form documents from your work in Illinois? Would it matter if it was an EJCDC document instead?
I have worked with AIA, ConsensusDOCS®, and EJCDC form documents, and all three are excellent resources that in the right hands can help save time and money for construction projects. But here’s the point – form contracts are wonderful tools that can help allocate risk and clarify the roles and responsibilities of the parties, but that is all they are.
In the construction field, the leading form contracts have been drafted by teams of experts representing the interest groups in general and supporting teams of attorneys. If you have never used or read one of these before, I would encourage you to take an evening and read through at least one of those mentioned above. Given the detail of the documents, it may be difficult to imagine that these forms, without editing, are likely not specific enough for your project. But keep in mind as you read that these are national forms and are meant to be of use throughout the U.S. By definition these forms do not generally consider 1) variations in State law requirements and 2) your particular project needs or goals. For that reason, credible forms such as those produced by AIA, ConsensusDOCS®, or EJCDC will encourage users to consult an attorney before using the document for specific projects. They are not meant for “plug and play” use.
For a great reference comparing these forms, see Gillies, Heckman, and Perlberg, THE Construction Contracts Book: How to Find Common Ground in Negotiating Design and Construction Clauses, American Bar Association 2008. The EJCDC and ConsensusDOCS websites both provide a matrix from this book for PDF download. The book may be purchased from the ABA website here.
[Ed note: I second Nathan’s book recommendation, which is a great resource for anyone considering the pros and cons of each set of form documents.]
Nathan and I look forward to answering your comments, thoughts, and questions. Drop us a note!
The American Council of Engineering Companies (ACEC) is holding a training seminar on key parts of the EJCDC form contracts. The seminar, entitled “Critical Design-Build Contract Provisions: Understand Legal Issues That Can Put Your Firm in Hot Water“, is scheduled to address several topics and the EJCDC take on those issues, including:
- Errors and Omissions–Handling of E & O under design-build is complicated due to inability to invoke the betterment rule.
- Licensing Laws–Since the Design-Build entity holds itself out to be both the “designer-of-record” and the “constructor-of-record”, appropriate professional registrations and business licenses need to be in place.
- Protests of D-B Bids and Proposals–What to do with protests of design-build procurements includes practical lessons for engineers
- Design Reviews–Conduct of design reviews under design-build may differ from traditional periodic reviews, because an owner can place itself in a responsible position by dictating changes during the review process rather than relying on the D-B entity to deliver an end-result in conformance with the design.
- Performance Guarantees–In some instances, owners seek to tie the design-builder to some strict performance standard.
- Who Owns the Design–On some government design-build contracts, the owner is insisting on owning the design product.
- Teaming Arrangements–There are many ways for engineers to participate in design-build contracts. Is your risk tolerance such that your firm can go “at risk” or would it be advisable for the firm to retain its agency status?
The Webinar is scheduled for Wednesday, April 20th from 1:30 to 3:00 PM, Eastern Time. Fees are $199 (members) /$299 (nonmembers). Click here to register.
Upcoming on the blog: a guest post discussing one practitioner’s use of each of three main form documents. Stay tuned!
A Note of Thanks to all who voted in the Construction Marketing Idea’s Construction Blog Competition. While this Blog came in second in the “popular vote” it was named “Best Overall Construction Blog” by the judges. I appreciate everyone who took a moment to cast a vote!
And, feel free to drop me a line anytime at firstname.lastname@example.org to share your ideas, thoughts, and suggestions for this blog.
Photo by mandiberg via Creative Commons license.
After my post on the Japan Earthquake last week, I heard from Civil Engineer Imad Naffa. Imad is a self-described “atypical Civil Engineer with passion for providing Building, Fire, Accessibility, ADA, LEED, Green and AEC related info. and resources” and the President and Founder of Naffa International, Inc., a Building Code Consulting Firm based in Fresno, California.
Imad has written about the Earthquake and Tsunami from the Building Code perspective in an article for his Blog entitled “Japan’s Earthquake and Tsunami My take as a Building Codes Engineer.” Check it out, as well as his interactive, curated Earthquake site. Editor’s Note: Since this was first posted, Imad has passed away. His blog was apparently taken down by his family, who have my deepest sympathies. Imad was a creative, knowledgeable, and kind man. He is missed.
Do you agree with Imad that it is imperative that the U.S. improve and update design, construction methods and building codes? Let Imad and me know your thoughts in the Comment section, below. And, if you are interested in Building Code resources, be sure to check out his comprehensive list of Technical Links, which I am adding to this Blog’s Resources page.
Recently I came across some good news out of Japan: their wind farms are still working, despite the calamities that nation has faced in the past week.
As I previously noted, wind power is picking up speed as a viable green energy source. The news out of Japan gives wind power another “feather in its cap”.
According to Yoshinori Ueda, leader of the International Committee of the Japan Wind Power Association & Japan Wind Energy Association, there has been no wind facility damage reported by any association members, from either the earthquake or the tsunami. Even the Kamisu semi-offshore wind farm, located about 300km from the epicenter of the quake, survived.
To read more about how the Japanese wind farms survived, read the full story from Kelly Rigg, HuffPost writer.
Ms. Riggs is also Executive Director of the Global Cool Cities Alliance (GCCA), which has a very interesting website which explains the science behind reducing Heat Island effects in cities through the use of light-colored, reflective roofs.
Photo: A wind farm in Kuzumaki, Iwate, Japan via jasohill.