Trusting that your fellow contracting party will act ethically and in good faith is essential. Aligning the parties’ interests with the project’s success creates the right foundation to build successfully. Setting the right tone and expectations between party relationships is one of the reasons that ConsensusDocs contracts have been used on construction projects worth more than $50 billion but have yet to be the subject of a reported court decision.
Price escalation and supply chain disruptions continue as top issues in construction. Getting a price escalation clause that adjusts prices and payments up or down based on an objective index like the ConsensusDocs 200.1 standard price escalation clause is the fairest and best way to combat this problematic issue. However, there is not a magic bullet or one-size-fits-all approach on this issue – it is an all-of-the-above approach. The early procurement of supplies is a common-sense approach that subcontractors, general contractors, and even owners employ to keep projects running on budget and on time. However, early procurement of supplies raises another issue: how do we account for storing these materials?
We have all heard the expression death by a thousand cuts. Listen to the just-released ԹϺ ConstructorCast and hear about a design-build construction project that had over 88,000 cuts. These cuts came in the form of owner comments on the contractor’s submittals that typically expressed an owner “preference” that was not necessarily a contractual requirement. Just trying to parse out the nature of the owner’s comments, the design-builder estimated it cost the company 49 person-years! Comments stating a preference were four times more likely than comments indicating something “non-compliant.” Some ENR top 75 firms have left the design-build market amidst this “midlife crisis” of risk.
When contracting for design-build, ConsensusDocs offers options. The ConsensusDocs 410 Design-Build Agreement [Cost of the Work with a Guaranteed Maximum Price (GMP)] is the most popular within ConsensusDocs. Contractually, the GMP is set by the ConsensusDocs 410.1 GMP Amendment. When should you set the GMP for a design-build project? Well, that depends. Parties should set the GMP as soon as there is enough design development as well as price and schedule certainty that the parties feel comfortable locking those terms into an agreement.
The Construction Owners Association of America (COAA) is the largest association of construction owners in the United States. COAA just held its Spring Connect conference in downtown Baltimore on the University of Maryland, Baltimore (UMB) campus. One session featured “What I Love and Hate About Updating My Contracts from an Owners’ Perspective.” ConsensusDocs’ Executive Director & Senior Counsel Brian Perlberg spoke on a panel with Joe Cleves of Taft Law and Pen Wolf from the Cleveland Clinic.
Consensus doesn’t mean unanimity. ConsensusDocs is the first and only broad-based coalition in the United States that publishes standard construction contract documents. ConsensusDocs has existed for over 14 years and has grown to over 40 construction organizations, including the three largest owner organizations in the U.S. One aspect that made consensus possible was allowing each participating organization the opportunity to provide their own individual comments to the standard ConsensusDocs language. This is done through the ConsensusDocs Guidebook. You can access the published ConsensusDocs Guidebook here: https://www.consensusdocs.org/guidebook/.
The ԹϺ annual convention included a session entitled “Who’s on the Hook for Design Defects in Design-Build Projects.” Fox Rothschild’s Dirk Haire, Les Synder of Infrastructure Construction Brightline West, and David Hecker of Kiewit presented. Attendees crowded into a standing-only room because more and more builders are facing design liability, especially design-builders on large infrastructure projects. The presentation highlighted how some owners abuse the submittal process on design-build jobs to make changes without compensating the builder with more time, money, or both. One project took a sample of owner comments and extrapolated that just one project generated over 15,000 submittals and generated over 110,000 comments of “concern” or “preference.”
Michigan State University (MSU) is a forward-thinking public owner that uses ConsensusDocs standard construction contracts as the basis for its projects. At the Associated General Contractors of America (ԹϺ) annual conference held in Grapevine, Texas, MSU's STEM Teaching and Learning Facility was considered “the most significant construction project of 2021” by ԹϺ. Granger Construction Company was the Construction Manager and a signatory party on the ConsensusDocs 500 contract. Granger received the association's top prize, Construction Risk Partners Build America Grand Award, and the award for the best construction management renovation project under $99 million.
In construction, alternative project delivery methods typically refer to design-build, construction management at-risk (CM@R or CMAR), and integrated project delivery (IPD). Design-build and CM@R have been commonly used for so long that it seems strange to call them “alternatives.” IPD and design-build are more written about as a subject matter. However, CM@R is just as popular as ever, and some practitioners see CM@R as the project delivery method that delivers project schedule towards completion the fastest. Experienced practitioners of CM@R like the ability to commence construction before all the design details for the entire project are determined. In Iowa, both chambers of the legislative body recently approved legislation, Senate Bill 183, that expands the authorization to use CM@R on public projects and explicitly disallows design-build for public projects. This would make Iowa one of two states banning design-build for all public projects joining North Dakota.
IPD represents a small share of project delivery methods used in the United States, but there are advantages. Lean construction works most efficiently with an IPD agreement providing the contractual framework to collaborate. A highlight recent study concluded that the business case for lean construction is compelling. A recent ԹϺ webinar outlining the study can be accessed here.