ConsensusDocs contracts revised to reflect latest industry best practices
BY NICK FORTUNA
When ConsensusDocs was established in 2007, it marked a major step forward for the construction industry. Twenty organizations in the architecture, engineering and construction industries had come together to transform the business of construction through standardized contracts.
Founding members of ConsensusDocs included AGC of America, Associated Builders and Contractors, Construction Owners Association of America, American Subcontractors Association and Mechanical Contractors Association of America.
Since then, the list of industry coalition members has doubled to more than 40, a clear indication that ConsensusDocs has achieved success. The platform now offers more than 115 contract and document templates organized by project-delivery method, providing fair and balanced language that all stakeholders in a project can trust.
“We must be doing something right,” said Brian Perlberg, executive director and senior counsel for Arlington, Va.- based ConsensusDocs. “The fact that we’ve grown our number of industry stakeholders is something that we’re quite proud of, and we want to continue with that robust participation.”
Perlberg estimated that ConsensusDocs has provided document templates for more than $100 billion in construction projects over the past 16 years, and in all that time, there hasn’t been a single case of parties litigating over the meaning of ConsensusDocs standard contract language.
That track record of success is reflected in the tagline for ConsensusDocs: “Building a better way,” Perlberg said. ConsensusDocs incorporates feedback from project owners, general contractors, subcontractors and design professionals to establish best practices that are fair for all stakeholders, he said.
“I think the competitive advantage for ConsensusDocs is that we’re active listeners, and we have input from the whole industry,” Perlberg said. “I believe that contracts play a huge role, a foundational role, in either improving the industry or holding us back, so we need to continuously improve our contracts, and we have a track record of doing that.”
By bringing more fairness to projects and eliminating repetitive, conflict-driven contract negotiations, stakeholders can build a better foundation for their projects and improve their likelihood of success, Perlberg said.
“Using ConsensusDocs isn’t a panacea for project success, but it is an indicator,” he said. “If you’re using ConsensusDocs, you’re trying to memorialize the business relationship, and you’re trying to have better communication. We want our contracts to lead to successful projects, not unsuccessful litigation, because when projects end up in litigation, all parties lose. We know that.”
Revised document templates
ConsensusDocs templates are revised every five years to keep up with industry trends, and the most recent update was completed in September. Despite the complex nature of construction projects, ConsensusDocs relies upon simple, clear language instead of legal jargon, making confusion and misinterpretation less likely. “Good legal writing should just be good writing,” Perlberg said. “You shouldn’t wait 10 years to update your contracts, and you shouldn’t wait for a problem to come up on a project before updating your contracts. You should be familiar with them, and in construction contracts, there can be changes in the law, in the insurance market and with technology and innovation, so it’s important that the business practices that you use in the field are reflected in your contracts.”
In recent years, builders have become increasingly involved in designing ele- ments of projects, even when those projects don’t use the design-build project-delivery method, Perlberg said. That trend has impacted builders’ legal exposure and insurance requirements, so addressing delegated design in more detail was among the most important aspects of the latest ConsensusDocs revisions, he said.
The revisions outline the procedures for delegating components of project design both at the prime-contractor and subcontractor levels, Perlberg said. The changes make it clear what each party, including the main design professional, is responsible for when it comes to project design.
The revisions also call for more involvement from project owners, requiring them not only to acknowledge that they have received design plans but to confirm that the plans are acceptable, Perlberg said.
“Construction has become more complex and sophisticated, and the builders and trade contractors often have the most knowledge and expertise when it comes to some of these complicated finishes, exteri- ors and other aspects of a project,” he said. “How that all comes together should be spelled out in project documents so each party has a better idea of what their responsibilities are.”
ConsensusDocs proved to be ahead of the curve during COVID-19 as the only standard construction documents that specifically mentioned epidemics as a force majeure, Perlberg said. That language helped to shield contractors from liability stemming from construction shutdowns and automatically gave them more time to fulfill their obligations.
With projects that didn’t use ConsensusDocs, it was unclear whether the pandemic could be used as a justification to extend project timelines, he said. That experience has spurred most parties to reevaluate their clauses regarding forces majeure and unexpected delays.
“There was a lot of uncertainty due to COVID-19, and having that specific language addressing epidemics in the contracts took a potentially contentious issue off the table,” Perlberg said. “We are also the only publishers of a standard price escalation clause, which is the most effective means for addressing price spikes and supply chain shortages. That became the number one contract topic a year after the outbreak of COVID-19.”
Clarifications vs. major changes
Perlberg said the most recent ConsensusDocs revisions don’t represent a major adjustment to existing risk-allocation principles because the language in the document templates already was fair to all parties. Instead, the revisions ensure that ConsensusDocs reflect the construction industry’s evolving best practices.
Changes to the language concerning delegated design include adding specificity to the process and requiring design coordination and responses from the lead design professional for proposed delegated design plans. The revisions create a consistent standard of care for all delegated design elements among both the prime contractor and subcontractors.
Significantly, the revised language stipulates that the constructor must conform its delegated design to the performance and design criteria provided.
Language regarding consequential damages also was revised to clarify that proceeds actually paid by insurance carriers to cover damages are excluded, Perlberg said. The ConsensusDocs revisions eliminate the requirement to procure a builder’s risk policy that covers existing structures, largely because that coverage is difficult to procure in today’s insurance marketplace,
Perlberg said. When that coverage is available, the deductibles often are extremely high, he said.
“There are other insurance products, more on the owner’s side, that are more appropriate for coverage of existing structures,” Perlberg said. “This is something that we might want to have ongoing discussions with the insurance industry about, but requiring it doesn’t work well as a contractual provision.”
Many of the changes to the ConsensusDocs were relatively minor, Perlberg said. They include language concerning attorneys’ fees in connection with alleged damage to owners’ property; uncovered work; submittals and interim directives; cost of work; hazardous waste indemnification; warranties for owner-provided materials and equipment; and the correction of work.
Perlberg said ConsensusDocs recently announced an integration with DocuSign that will allow users to sign ConsensusDocs contracts digitally without leaving the ConsensusDocs technology platform. “This is a major improvement in convenience,” he said.
DOCUMENT TEMPLATES AT YOUR FINGERTIPS
ConsensusDocs offers more than 115 templates for construction contracts and documents, organized by project-delivery method. The documents include:
• 200 series – general contracting
• 300 series – collaborative
• 400 series – design-build
• 500 series – construction management
• 700 series – subcontracting
• 800 series – program management
• 900 series – private/public partnerships
Subscribers to ConsensusDocs will have access to older document tem- plates that don’t reflect the newest revisions for the next 13 months. For more information, visit https://www.consensusdocs.org/.