ConsensusDocs Creates Fair and Detailed Agreements — Especially in the Time of COVID-19
Posted: August 14, 2020 | Legal Advice
In green building projects, every detail matters, and specifying those details in construction contracts provides a clear road map for reaching green building goals, whether it’s calling for certain sustainable materials, adhering to a project timeline, or earning U.S. Green Building Council’s LEED certification.
But unforeseen events can disrupt even the most well-considered construction plans. That’s why flexible, easy-to-read, standard contracts that robustly protect all stakeholders are more important than ever.
For the past 12 years, ConsensusDocs have become an invaluable industry resource for such contracts. ConsensusDocs are standardized contract documents written by and for the design and construction industry, and developed by the ConsensusDocs Coalition, a group of 40 design and construction industry associations.
The COVID-19 pandemic has illuminated the need for fair and detailed contracts in a way that few other events have ever done. The crisis has been fast-moving and confusing as it rips through the construction world, shutting down projects, sickening workers, requiring physical distancing, and disrupting global supply chains. But ConsensusDocs is well positioned to help its stakeholders navigate these uncharted waters.
“Our standard document specifically mentions epidemics,” says Brian Perlberg, executive director and senior counsel for the design and construction contract organization ConsensusDocs.
A strong force majeure clause (which frees contracted parties from liability during an event beyond their control), along with language that specifically mentions epidemics, have helped excuse stakeholders from delays and supply chain disruptions, allowing for penalty-free project timeline extensions.
“If you don’t specifically mention [epidemics], you may not get extra time from your force majeure clause,” Perlberg says. “By providing a more comprehensive, detailed force majeure clause, we’ve gotten a lot of plaudits for how we’ve handled this unforeseen event.”
Clear language and attention to detail in the face of a pandemic isn’t the only reason ConsensusDocs is a go-to for construction contracts. As its name says, it aims to create consensus between all parties involved, fairly allocate risk, and protect the best interests of the project itself.
Improving on an Industry Standard
Although standard contracts for the construction industry have existed for a long time, they’ve traditionally been produced and offered by just one party, often leaving the other parties involved concerned that the contract is unfair. That’s not the case with ConsensusDocs, says Howie S. Ferguson, executive director of the Construction Owners Association of America (COAA).
“They’re fairer and more balanced when it comes to assignment of risk and responsibilities between the parties,” Ferguson explains, noting that he doesn’t believe that the same is true for other standard contracts from organizations like the American Institute of Architects.
“Their documents, not surprisingly, tend to favor architects,” he says. “Same for other industry-standard contracts.”
Historically, the remedy has been to amend those unbalanced contracts so much that “the modifications exceed the length of the standard document,” Perlberg says.
Instead of having a clear, concise, and fair contract from the beginning, stakeholders are left with what Perlberg calls a “Frankenstein project.”
“They’re sewn together with the dead body parts of every failed project that they’ve ever experienced,” he says.
ConsensusDocs aims to remove that cycle of repetitive renegotiation, creating contracts that are in the best interest of all parties, right from the beginning.
“The mission of ConsensusDocs is to identify best-practice standard construction contracts that help create better project results, primarily from lowering transactional costs from repetitively negotiating,” Perlberg says.
ConsensusDocs was founded in 2007 by 20 organizations in the architecture, engineering and construction industry. That founding principle of collaboration is key to success, creating a meritocracy in contracts, rather than a top-down approach that doesn’t adequately consider the expertise and input from other parties involved.
For instance, traditionally, “the architect of the project has been thought of as the decider and the one with authority and a certain level or prestige in that role,” Perlberg says. But, he adds, “many other project participants and stakeholders have roles to play and sometimes have superior knowledge.”
The key to fairness and success is creating “a structure to share that information earlier in the process,” he says. “Getting all that information; measuring twice and cutting once.”
Today, the ConsensusDocs Coalition consists of 40 organizations that collectively represent more than 300,000 individuals and companies. ConsensusDocs uses a tiered subscription model to offer more than a hundred different contract documents to its subscribers.
Ferguson says COAA’s decision to be part of ConsensusDocs was a wise one, because they’re “more inclusive of partner input and perspectives and [require] far less maintenance for our tiny staff.”
Image by Dimitris Vetsikas from Pixabay