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I was asked recently to speak on a panel for the Mid-Atlantic Region of the Construction Man-

agement Association of America’s regular dinner meeting. The topic was an interesting one: Compare and contrast the new 2007 edition of the A201 form of General Conditions and the ConsensusDOCS 200 form of General Conditions relative to schedule impact. Preparing for the debate forced me to take a bit of a different look at the two documents and, at the same time, consider the im-pact of front-end documents in general and how they can impact, positively or negatively, the schedule of a project.

It is often said that contrac-tors are looking for a good set of plans and specs, balanced and equitable contract documents, fair and competent contract administration, and they want timely payment. I began to look at that concept in relation to the schedule impact and to the clauses in the two documents in question as well as those in the myriad contract documents I review each year. What clauses have an impact on the ability of the project team to complete the project on time? I would suggest that all those charged with the responsibility of preparing bid-ding and contract documents look at them in that light.

So let’s explore several areas of bidding and contract documents that could impact schedule:

Equity: It is an interesting irony that there is a view among some that the more onerous the contract clauses, the better pro-tection against the unscrupulous contractor and, therefore, the better the project, because “We won’t have to use those clauses against the good contractors.” It has been my view that such clauses push the good contrac-tors away, or at least place them at a competitive disadvantage. In the late 1980s, the Construction Industry Institute (an arm of the Construction Users Roundtable

at that time) published the re-sults of a study of equity clauses, such as delay damage and dif-fering conditions. The study concluded that “Clauses that place an inequitable risk burden on the contractor are not cost effective for the owner” as they “increase prices, decrease qual-ity, restrict bid competition, cre-ate an adversarial relationship and a situation the contractors cannot bear or control and have a negative impact on overall project performance.” Further reading concludes that “project performance” relates directly to quality and schedule.

As we look to the A201 and ConsensusDOCS 200 we find some subtle and not-so-subtle differences relative to risk shift-ing. Obviously, a typical AGC NYS spec review looks at the supplements to these and other documents to determine the positive or negative impacts of those clauses as well.

Ability to obtain financial information: This is a signifi-cant issue. Based on pressure largely from a small group of owners within the AIA, the 2007 edition of A201 made a very significant change rela-tive to the contractor’s ability to obtain information about the owner’s financing of the project. Previous editions of A201 made

The Impact of Contracts and general Conditions on Schedule – part Iby Joseph p. Hogan, CDT

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Joseph p. Hogan, CDT

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it clear that the owner “shall” provide “reasonable evidence that the Owner has made fi-nancial arrangements to fulfill the Owner’s obligations under the Contract” upon request of the contractor throughout the life of the contract. The 2007 edition states only that the “contractor may request” the information prior to commencement of the work, and thereafter only if certain conditions, which are subject to interpretation, exist. Even at that, the clause allows the contractor only to ask. It does not, as in earlier editions and ConsensusDOCS 200, state that the Owner shall provide the information.

This risk shifting is even more problematic in New York State due to the fact that contingent payment clauses are not allowed. All the risk of non-payment lies with the general contractor, who now has very limited tools to guard against that risk.

Unforeseen conditions: With regard to the issue of dif-fering conditions, in both A201 and ConsensusDOCS200, the basic unforeseen or differing site conditions clauses are similar in that they allow for compen-sation in the event conditions differ materially from those that were anticipated. There is, however, a subtle difference with the addition of Article 3.7.5 of A201 relative to burial grounds and wetlands. Given the lack of the word “know-ingly,” contractors should be

cautioned about some added liability, particularly with re-gard to wetlands.

That said, it is not uncom-mon to see such clauses modified to more onerous ones relative to unforeseen conditions. When encountering such modifica-tions, I regularly offer the fol-lowing commentary:

If the condition is truly unanticipated, then proper compensation should be made. Enclosed please find a copy of the Construction Industry In-stitute’s treatise entitled “Con-tract Risk Allocation and Cost Effectiveness.” One of the top-ics covered in this booklet is the issue of differing conditions. It

is important to note that in this study of both owners and con-tractors, conclusive evidence was found that inequitable clauses in this regard “may increase prices, decrease quality, restrict bid competition, create an ad-versarial relationship and a sit-uation contractors cannot bear or control and has a negative overall impact on overall proj-ect performance.” Contractors should be able to bid on real-ity rather than contingency.

Delay damages: Com-paring the 2007 edition of A201 with ConsensusDOCS

200 relative to delay dam-ages will reveal a subtle but, in my view, critical difference. While both clauses ostensibly allow for compensation for delay-related damages, A201 states in 8.3.3 that “Claims related to time shall be made in accordance with applicable provisions of Article 15” (the dispute resolution provisions). Article 6.3.2 of Consensus-DOCS 200 states that in the case of delays caused by “acts or omissions of the owner, the architect/engineer or others ... the contractor shall be entitled to an equitable adjustment in the contract price…” What is the difference? The former

forces every delay situation into a claim situation, while the latter empowers the project team to compensate for the delay through the change order pro-vision in the normal course of the project. This could have a major impact on the basic fair-ness and efficiency of contract administration.

The history of this clause with such owners as OGS shows that it allows the execu-tives to send a clear message of fair treatment of contractors, which has a positive impact on cost and project performance.

WITH THE SpEC REvIEWER

The history of this clause with such owners as ogS shows that it allows the executives to send a clear message of fair treatment of contractors, which has a positive impact on cost and project performance.

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I n the last issue of Cor-nerstone I began the dis-cussion of the impact of the front end of contract

documents on project perfor-mance particularly as it relates to schedule. Most of Part I of this article dealt with the somewhat nebulous link be-tween unfair/onerous clauses and schedule. In this part, much of the discussion will be mostly about more specific process impacts created by the contract documents. As you think about your projects, go over some of the issues that cause schedule problems - Decision-making (or lack thereof); a baseline schedule not approved four months into a project; a change orders process that takes months; a

submittal process that is long on rules and short on timely results; or a dispute resolu-tion process that is cumber-some and unfair. How do all these issues potentially impact schedule and how are they treated in the contract?

scheDule

The procedure to development and maintenance of the project schedule is obviously a basic issue of import to the schedule itself. Unfortunately, contract documents and requirements often make the process overly complex, or the owner is ab-sent in dealing with separate contractors the owner has (by law or by choice) brought to the project. Like all process issues on a project, the ques-tion must be asked – Is the scheduling process serving the needs of the project?

Does this scenario sound fa-miliar? The scheduling pro-cess dictates such complexity that the project staff can nei-ther develop nor understand in sufficient detail the prod-uct that is developed. That is true for the contractor, owner and designer. Consultants are brought in on both sides and arguments ensue about wheth-er there are enough activities. Four months into the project, no baseline schedule is agreed

upon and it’s time for a sched-ule update. Is this process serving the needs of the proj-ect, or is it just an independent process “full of sound and fury signifying nothing”?

Consider this scenario: There are to be other contractors on the project and the contract documents indicate that the owner will play no role in the coordination of schedules and operations among the sepa-rate contractors. In fact, that responsibility (and liability) is left to one of the separate con-tractors – Namely you. That separate contractor has their own ideas relative to schedule and they conflict with yours. Attempts to get the owner in-volved are unsuccessful be-cause the owner points to the contract documents and says, “That is your responsibility.” What is the impact on sched-ule here?

It is important to recognize that in order to exert proper control and coordination, a contrac-tor needs three things relative to the contractor(s) they must organize – A direct contract with the contractor; control of the money; and choice of the contractor both for the current and, more importantly, future contracts; are critical. In most cases it would seem advanta-geous for the owner to simply

The Impacts of Contracts and General Conditions on Schedule - Part II of IIIBy Joseph P. Hogan, CDT

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have a single entity respon-sible for the entirety of the project. Where that is not feasible given the project circumstances, it is impor-tant that the owner play an active role in the coordina-tion process. From a public work “Wicks Law” stand-point, please remember that the landmark case of GBC v. the City of Syracuse provides that the owner must coordi-nate the separate primes.

As we look to the schedule provisions in the Consen-susDOCS 200 and the 2007 Edition of A201, there are similarities but the subtle differences can be key. Ar-ticle 6.1.3 of A201 states, “The owner shall provide for coordination of the ac-tivities of the owner’s own forces and of each separate contractor…” Article 3.2.2 of ConsensusDOCS 200, on the other hand, ensures a more engaged owner in that it states that where separate contractors are utilized, “the contractor and the owner shall coordinate the ac-tivities of all forces at the worksite.” The clause goes on to provide for equitable adjustments where the coor-dination activities create the need for the same.

In a related matter, Article 3.10.2 of the new A201 states that if the contractor fails to provide a submittal schedule, no adjustments in price or time on account of submittal reviews that are too lengthy will be allowed. The architect is effectively given carte blanche. What

do you suppose the impact on schedule will be in that case?

submITTals

With that as segue; the next process issue to discuss is that of submittals. This is a process that can often take on a life of its own with little or no appreciation that it is supposed to be serving the project’s needs. Authors of contract documents of-ten create submittal clauses, probably intended to avoid some past abomination or an imagined potential problem in the future. These serve selfish needs but end up hurting the project. Recent-ly I have seen clauses that state, “Contractor should an-

ticipate 15 business days of review time – per submittal sheet.” Upon thinking about all the sheets relative to the steel and getting out of the ground, I posed the ques-tion to the architect – “Do you ever intend to finish this job?”

Similar to the latest iteration of A201 relative to submit-tals schedules, I have seen clauses that state that the contractor will not be paid until the submittal schedule is submitted and “approved.” What, do you suppose will be the impact on schedule and performance here?

More commonly these days clauses are found that seek to back-charge contractors where the submittal is re-jected and, therefore, must be resubmitted. While I would acknowledge that there is potential for abuse on the part of some contractors and subcontractors in that they do not pay attention to the speci-fications, the potential tit-for-tat here is tremendous. At the end of the day, does such a clause get the project team any closer to completing the project on time?

A common thread of all these clauses is a lack of fo-cus on project completion and performance. I often hear, “We don’t really in-

tend to enforce these clauses except in extreme cases.” It is important to note that the mere existence of such clauses breed difficulties that can damage the project. Difficulties such as design-ers who, rather than pick-ing up the phone, reject a submittal for lack of a piece of paper. Or consider own-ers’ bureaucratic staff who threaten architects’ poten-tial for future work because they are not meeting the 15-day submittal review provi-sions on every submittal, even though they are work-ing with the contractor to ensure the right submittals

are returned in proper time. Such events have a tendency to “blow up” a project rela-tive to schedule and perfor-mance.

As I look to the AIA and ConsensusDOCS clauses on this, there are important distinctions to bear in mind. Article 4.2.7 of A201 re-quires the contractor to pro-vide submittals in sufficient time to permit adequate re-view by the architect. The timing the contractor bases his submittal on is at “the Ar-chitect’s professional judg-ment.” Juxtapose this with ConsensusDOCS 200 where Article 3.14.1 states that the contractor “shall deliver its submittals in a manner con-

sistent with the schedule of the work” and then in 3.14.2 declares, “The Owner shall be responsible for review and approval of submittals with reasonable promptness to avoid causing delays.”

This concludes part II of the series on the impact of contract clauses on sched-ule and performance. Stay tuned for Part III in the next issue where the series will conclude with discussions of RFI’s, change orders and dispute resolution.

Joseph P. Hogan, CDT, is the Vice President – Building Services of the AGC NYS.

I often hear, “We don’t really intend to enforce these clauses except in extreme cases.” It is important to note that the mere existence of such clauses breed difficulties that can damage the project.

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I n this final installment of how contract documents/clauses impact project

schedule, we will explore the basic process issues of change orders, RFI’s/Decision-Mak-ing, and Dispute Resolution. As you know, these basic, process issues are the root of evil when it comes to sched-ule.

change Orders

With regard to change orders, I have a saying - “Change or-ders are not a problem until they are a problem.” While that sounds a bit like Yogi Berra, it is based on com-ments often heard from proj-ect management on troubled projects to the effect that “we are too busy building the project to focus on change or-ders.” As you might imagine, this is about the time that sub-contractors have had enough and will no longer perform necessary change work, if they staff the job at all. Of course, change orders in and of themselves have an impact on schedule. It is important to look closely in the contract documents at the process and procedure for dealing with changes to the contract. Once that is done, the tools that are available should be utilized to minimize such impact.

Looking at both the A201 (2007 edition) and Consen-susDOCS 200 treatment with the issue of change orders,

there are some significant tools that can be utilized in the effort to minimize the sched-ule impact. Let’s explore the pertinent clauses.

Article 7.1.1 of A201 states that changes in the work may be accomplished by the issues of a change order or a con-struction change directive. Article 7.2.1 goes on to define a change order. It states that a change order only exists where there is agreement on all the following: “The change in the work; the amount of the adjustment, if any, in the con-tract sum; and the extent of the adjustment, if any, in the contract time.” Without those three ingredients, there is no change order. Rather, there is a “construction change direc-tive,” which is dealt with in detail in Article 7.3.

Why is ThaT impOrTanT?

As a contractor, you should be performing no change work without one or the oth-er. If there is a fully-executed change order, it is easy to see that the change work, when completed, can be invoiced and paid. With a directive, on the other hand, that road to payment has been more diffi-cult in the past. A reading of 7.3.9 of A201 provides that road. It states “Pending final determination of the total cost of a Construction Change Directive to the Owner, the contractor may request pay-

ment for work completed un-der the Construction Change Directive.” The clause goes on to state that the architect will make a determination of those requests and certify for payment costs that are rea-sonably justified.

The lesson here is that you need to demand either a change order or a construction change directive. If the latter, you should be including the costs in the requisitions.

Turning to ConsensusDOCS 200, we find a slightly dif-ferent approach. A look at Article 8.2 finds clauses that call for an “Interim Directed Change,” where a change or-der is not agreed to prior to the performance of the work. Like A201, the contractor can submit its cost for such work with the application for pay-ment. If there is a dispute about the costs at that point, the owner will pay 50 percent of the estimated costs. The subtle difference is that both parties are encouraged to ne-gotiate a final change order.

rFi’s/decisiOn-making

How often has the process of answering simple questions gone awry and the schedule is impacted? Often, one ques-tion begets a silly response that begets another question and so on. In other cases, the question goes to the archi-tect’s on-site representative

The Impacts of Contracts and General

Conditions on Schedule - Part III of IIIBy Joseph P. Hogan, CDT

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who must go to the principle in charge, who must then go to a sub-consultant. Then, the sub-consultant doesn’t want to come on-site due to construction administration costs.

A look at the issue of RFI’s and Decision-Making are not dealt with in depth in either A201 of ConsensusDOC200 but there are some key dif-ferences that are important to keep in mind. Where Article 4.2.4 of A201 places the ar-chitect and communications between owner and contrac-tor, Article 4 of Consensus-DOC 200 does not directly recognize the role of the ar-chitect and acknowledges that the contract is between owner and contractor. Article 4.7 of ConsensusDOC 200 even states that an owner’s repre-sentative (to be named) “shall have the authority to bind the owner in all matters requiring the owner’s approval.” Jux-tapose that clause with 4.2.1 of A201, which states “The architect will have authority to act on behalf of the owner only to the extent provided in the contract documents.”

On the matter of timeliness of answers, Article 4.2.14 of A201 states that the respons-es to questions will be made “in writing within and time limits agreed upon or other-wise with reasonable prompt-ness.” What is the meaning of “reasonable” and who decides? What is the mea-sure? It should be noted here that an RFI should, wherever feasible, be preceded by a discussion about what “time limits are agreed upon” for the answer to that RFI. Com-pare this to the simple clause

in Article 4.1 of Consensus-DOC 200 – “Any information or services to be provided by the owner shall be provided in a timely manner so as not to delay the work.” That is “reasonable promptness” as it should be defined!!!

Something to watch out for in the area of RFI’s are claus-es I am seeing lately to the effect that the contractor will be back-charged for asking questions that the architect determines could have been answered if the contractor had read the documents or if the contractor asks more questions than some arbi-trary number of RFIs called for. When I see such clauses I ask whether the contrac-tor can charge for having to ask questions (or ask the ar-chitect questions that could have been answered if he had visited the site). I also suggest, with regard to those clauses referring to arbitrary numbers of RFI’s, that the architect be paid more for a set of documents that require more RFI’s.

It should be noted that many of the problems related to getting answers have their genesis in the consultant agreements, particularly in the contract administration por-tion. It should be a practice to seek copies of the owner-consultant agreements on projects you are on so that you know what you are up against. If you are concerned about a backlash, use your bonding company as the rea-son for the request.

dispuTe resOluTiOn

This is, in many respects, the granddaddy of them all with

regard to potential impact on project performance. The contractors and sub-contrac-tors perceived view that the process in untimely and un-fair will impact the project such that performance and schedule are affected in a negative way.

ConsensusDOC 200 attacks this danger directly in Ar-ticle 12 which sets forth that timely process that can only be viewed as seeking equity. It starts with a call for direct discussions at the senior executive level with strict time frames in place. Once those time frames are breached it calls for dispute mitigation procedures with either a project neutral or a DRB (dispute review board). Failing there, mediation is called for and then, as a fi-nal step – either arbitration or litigation. Article 12.5.1 even includes a “loser pays” provision, should it get to the binding dispute resolution portion. While some have suggested that this is a long process, I disagree. Rather, the step in the process makes it more likely that the matter will be resolved very early and, if not, the steps are not necessarily long when com-pared to the typical alterna-tive of all such matters being put off until the end of the project.

Now to the 2007 edition of A201, which is one of the most onerous and draconian dispute resolution processes I have seen. While Article 15 speaks of mediation and ar-bitration, it is all illusory be-cause of what precedes those clauses. Article 15.1.2 calls for all claims to first go to

the, “initial decision maker,” which is the architect unless the owner designates other-wise. This initial decision maker effectively becomes judge, jury and executioner. Article 15.2.6.1 states the following (read closely):

“Either party may, within 30 days from the date of an initial decision, demand in writing that the other party files for mediation within 60 days of the initial decision. If such a demand is made and the party receiving the de-mand fails to file for media-tion within the time required, then both parties waive their rights to mediate or pursue binding dispute resolution proceedings with respect to the initial decision.”

Yes, you’ve read that right. If the initial decision-maker files for the owner and you seek to dispute that further, your claim is denied if the owner decides not to file for mediation, arbitration or litigation, for that matter. AGC of America was sure that AIA simply worded the clause wrong that could not have been what they intend-ed. When AGC pressed AIA to correct what they believed to be an error, AIA refused. That, apparently, is exactly what they intended.

Good Luck!!!

Remember, when attempt-ing to deal with unfair or unworkable contract docu-ments, Call AGC NYS. We may be able to help.

Joseph P. Hogan, CDT, is the Vice President – Building Services of the AGC NYS.

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