Changes to the AGC ConsensusDOCS Impact Damages, Pricing, More

By Bryan A. Kelley Oles Morrison Rinker & Baker LLP

In its continued effort to provide industry sensitive contract documents the AGC of America recently issued several updated ConsensusDOCS forms. ConsensusDOCS features over 90 contract and project administration documents organized into six categories: General Contracting (200 Series); Collaborative/Integrated Project Delivery (300 Series); Design-Build (400 Series); Construction Management (500 Series); Subcontracting (700 Series); and Program Management (800 Series). Recent changes seek to improve several “core” contract agreements.

Some changes intend to keep terminology consistent throughout contract groups. The 200 series has replaced “contractor” with “constructor” to be consistent with the 300 series where there is heightened need to distinguish construction-related responsibilities. Similarly “Architect-Engineer” has been changed to “Design Professional.” Contract forms for other alternative delivery methods (400 and 500 series) continue to use the terms “Design-Builder” and “Construction Manager” respectively.

Other changes are more substantive. The term “Contract Documents” has been clarified. While its definition in prior forms included “drawings specifications addenda issued prior to execution of this Agreement…” such information now must be listed in the contract and “issued and acknowledged prior to execution of this Agreement.…” A constructor now agrees to perform Work that is in accord with and reasonably inferable from the Contract Documents (period). The more complex concept used in prior forms – that the constructor’s Work will be in accord with and reasonably inferable from the contract “as being necessary to produce the indicated results” – has been deleted.

Several changes affect the scope of recoverable damages. A new clause states that default termination of a constructor if later found improper shall be converted to a termination for owner convenience. The change undoubtedly is influenced by public works contracting and limits constructor recovery of expectation damages and lost profits. That said the Disputes provision has been broadened to award reasonable attorney’s fees to the prevailing party and not just “costs.” Note that the change appears in several 200 400 500 and 700 series contract forms but not all of them (e.g. CD 300 415 510).

Other changes include the addition of a “Time is of the essence” clause. A constructor now is required to send submittals to the Design Professional as well as the owner on design-bid-build projects. Several changes pertain to pricing; estimators should note that “Overhead” no longer includes insurance deductibles or “costs related to the correction of defective work” and certain contract forms now itemize cost items for change order pricing and give owners increased audit rights. The ConsensusDOCS Guidebook now contains new optional language that creates an early completion incentive as a counterpart to a liquidated damages provision.

Changes to the subcontract forms (700 series) largely reflect an effort to give subcontractors rights that are more consistent with constructor rights in relation to an owner. For example recovery of consequential damages from a subcontractor is limited to only those damages which “the Owner is entitled to recover against the Constructor….” Further subcontractors now have a right to obtain information regarding the owner’s financial ability to pay. Reductions in owner-withheld retainage must similarly be passed on to the subcontractor and like constructors subcontractors now are to receive two notices to cure defective work – not just one.

ConsensusDOCS also added two brand new contract forms to its subcontracting catalogue. CD 703 is a standard agreement form for constructors purchasing materials or equipment. CD 725.1 is an insurance exhibit to accompany CD 725 the standard agreement between subcontract and subsubcontractor. The latter document is said to be an industry first.

While not an exhaustive list the examples above show the broad range of changes and their varying degree of significance. The recent update was expansive. It touched many documents and included other changes not mentioned. As always we strongly recommend that the contracting parties read all terms before signing especially when using standard forms that have been updated and might have changed in unexpected ways.

For more information on the January 2011 contract forms update visit www.consensusdocs.org/news/ and www.agc.org. All ConsensusDOCs and a new version of DocuBuilder software (Release 7.0) reflecting the recent changes is available at the ConsensusDOCS website.

Mr. Kelley is a Partner at Oles Morrison Rinker & Baker LLP. He is a member of the AGC of America Contract Documents Committee and can be reached at (206) 623-3427.