ConsensusDocs recently presented a webinar entitled “Managing Subcontractor Default, Bankruptcy, and Owner Insolvency in a Recovering Post Covid-19 Construction Economy.” The webinar, moderated by Phil Beck, a partner in the law firm Smith, Currie, and Hancock LLP, highlighted several steps that construction professionals can proactively take to protect themselves and their projects’ success.
ConsensusDocs standard agreements such as the ConsensusDocs 200 prime agreement allow a builder to request and receive project financial information before construction begins as well as during construction. Owners may wonder what kind of questions might be asked of them. ConsensusDocs, which is a Coalition of more than 40 construction organizations that includes Owner organizations, publishes the industry’s only standard financial questionnaire, the ConsensusDocs 290.1 Owner Financial Questionnaire. The questionnaire provides guidelines and reasonable questions about project financing. Receiving timely information regarding project financing is critical to builders’ financial viability. The payment flow is the lifeblood of a General Contractor. General Contractors are more likely to go bankrupt from not receiving payment on work put in place, rather than lack of work.
The American Institute of Architects (AIA) also publishes standard contract documents, but the AIA A201 General Conditions Document restricts access to financial information once the project commences. Under AIA, the default for commencement of the project is the date of contract signing, which means getting project financial information is restricted before dirt is even moved. Thereafter, a builder must provide a reason for the request and the architect determines if the request is reasonable. AIA does not provide examples of reasonable questions to ask owners about project financial information. It is also unclear about the consequences for not receiving reasonably requested information.