With over $300 billion dollars in annual revenue tied to alternative project delivery, staying ahead of contracting best practices is crucial for the construction industry. Revenue from the top 100 design-build firms increased more than 26 percent from 2023, according to Engineering News Record’s (ENR’s) 2024 report on top design builder firms (see additional resources below). ENR reports even more overall revenue generated from construction management at-risk firms than design-build firms. To reflect industry advancements and maintain its position as a leader in fair and collaborative contracts, ConsensusDocs is preparing to publish comprehensive edits to its 400-series family of design-build standard contract documents.
These updates were drafted by the ConsensusDocs Contract Content Advisory Council which includes practitioners with collectively hundreds of years of experience in construction contracting. ConsensusDocs standard contracts have a higher market penetration in the design-build, CM At-Risk and integrated project delivery (IPD) project delivery methods because ConsensusDocs is particularly strong in encouraging collaboration and communication contractually. Some forthcoming revisions in the ConsensusDocs 410 Design-Build (Cost of the Work with a Guaranteed Maximum Price (GMP)] and the ConsensusDocs 415 Design-Build (Lump Sum) standard agreements include:
- Limited Waiver of Consequential Damages: Revised the limited waiver of consequential damages (§6.5) to clarify that insurance coverage is exempt from the consequential damages waiver only if the insurance coverage pays for the loss. Waiver of consequential damages is one of the most important and negotiated provisions in construction contracts. The previous standard language excluded insurance coverage from the waiver of consequential damages. This principle remains as insurance provides a fair way to allocate risk among the parties.
- Builder’s Risk Policy: Eliminated the requirement (at subsection 11.3.1) to cover “existing structures” under this property insurance. Obtaining property insurance through a Builder’s Risk policy that covers damage to existing structures may not always be feasible. There was also a clarification to measure risk of loss as transferring at Substantial Completion, rather than Final Completion.
- Interim Directives: Revised and provided additional clarity surrounding interim directives. ConsensusDocs uses this term to include directed change orders that are ordered because of a lack of agreement on cost and schedule impacts, as well as field instructions. AIA uses the term “construction change directives (CCDs)” for a similar concept. The revisions clarify that an owner’s issuing an interim directive does not necessarily increase cost or time.
- Reasonable Attorney Fees: Throughout the standard agreement, clarified that all reimbursable attorneys’ fees must be reasonable. It is worth noting that ConsensusDocs provides for the non-prevailing party in claims to pay reasonable attorneys’ fees and court costs, which is unique to ConsensusDocs standard contract documents.
- Statute of Repose: Added statute of repose in addition to statute of limitations as reasons for barring commencing arbitration (at subsection 13.5.11). Some state courts have ruled that the statute of limitations and statute of repose don’t apply to arbitration actions. Therefore, it is prudent to put this in standard contracts.
- Cost-of-Work: Added itemized cost-of-the-work items incurred due to emergency and legal, mediation, and arbitration fees and costs not associated with a dispute between the parties.
- No Waiver of Performance: Clarified the “no waiver of performance” language so that not necessarily enforcing or insisting upon a contractual right does not waive such contractual right by implication (§14.6).
- Contingent Assignment Added a required contingent assignment provision for suppliers as well as subcontractors in subcontractor and supplier agreements §5.3.1).
- Hazardous Materials Created a duty to defend as part of a Design-Builder’s indemnity obligation to hold the owner harmless for hazardous materials brought to the site by the Constructor or someone the Constructor is liable (at subsection §3.7.7.3).
- Warranty: clarified that Constructor’s warranty obligations to correct material and equipment defects for owner-provided materials equipment are limited to installation defects (§ 3.8.2).
- Damaged Work: Clarified that Constructor’s obligations to remedy damage or loss do not apply to damage covered by an owner’s property insurance or is attributable to the owner or the owner’s separate contractors (§3.5.6).
ConsensusDocs subscribers who have access to the design-build documents will get immediate access to these newly updated documents upon publication. Existing users will get to choose whether to use the new standard forms or the previous edition for the next 13 months. ConsensusDocs is a Coalition of over 40 different design and construction associations. Each group has an equal voice at the drafting table to write best-practice standard construction contracts that are fair to all stakeholders in the A/E/C industry. Each national association group participating in ConsensusDocs is invited to provide two volunteers for the comprehensive drafting process, making up the Council.
Comments or questions about this article can be directed to Brian Perlberg, Executive Director & Senior Counsel, ConsensusDocs Coalition, at bperlberg@ConsensusDocs.org.
Additional Resources
ENR Top Project Delivery Firms
ConsensusDocs Guidebook, which you can access here