Don’t gamble when it comes to the contract

“Standard” form Construction contracts come in all sizes and shapes. There are the American Institute of Architects (AIA) forms, EJCDC (a joint effort of NSPE, ACEC and ASCE), AGC and, for international work, FIDIC, the JCT (Joint Contracts Tribunal) and others, such as the Engineering Advancement Association of Japan (ENAA). So what is the standard?

The Design-Build Institute of America (DBIA) has taken valuable steps toward creating some degree of uniformity in this area in its Design-Build Manual of Practice. Even so, these forms must be general enough to be adjustable to a wide range of applications.

For an attorney who is drafting a proposal for design/build, all of these forms are helpful. They provide a checklist for what should be in the contract. During renewal, these forms can be used as a guide for what might be missing from a contract.

Not only are casinos highly regulated, but the parameters for this construction are different, even though the contracts contain design/build components.

The paramount concern of casino construction is the scheduled completion date. Since tour groups, entertainers and other plans are often made years in advance, late completion will have serious financial consequences for the owner. The prospect of consequential damages for untimely work looms large.

Here is a checklist of other considerations:

1. Site status. The contractor should make certain, in writing, that all site needs are conveyed to the owner as early as possible (e.g., all painting is completed before device installation). The customer should see if such demands are reasonable.

2. Contract review. Analysis of terms and conditions is always important. With gaming and hospitality industries, there will be secrecy demands, tight control of shop drawings and catalogue cuts, and extensive reporting requirements. If in doubt, consult your attorney.

3. Change order controls. The customer will want the most up-to-date equipment. As a result, changes should be expected and monitored, especially those based on oral direction from the owner.

4. Stability of field management. Every effort should be made so that whoever is running the job will be there from start to finish. Consider using an employment contract, or incentives, or both.

5. Purchase order management. Particularly for specially made equipment and devices, keep a schedule of expected delivery dates, and keep contact with your suppliers to confirm those dates.

6. Site inspections. Someone from the home office should be assigned to review periodically the status of the construction.

7. Submittal controls. It is not enough for the contractor to simply to pass on his or her suppliers’ drawings and specifications to the owner. They should be reviewed for compliance with the contract.

8. Claims procedure. Determine what, if any, claims procedures there are in the contract (time extensions, extras, interferences from others).

9. Special needs. Any special needs (secured storage, dust-free environment, special installation equipment) should be discussed with the owner at the time of contracting and commitments should be obtained.

10. Changes in the law. In today’s environment, changes in security regulations can be a concern. In a version from EJCDC, the language states:

“Changes in Laws and Regulations not known or foreseeable on the date of receipt of Proposals having an effect on the cost or time of performance may be the subject of a claim ....”

With a classic, specified job, the warranty will apply to deficiencies in workmanship and materials. In the design/build context, and especially with gaming and hospitality, the warranty will cover this concern, but it will also require some form of warranty of design or performance, or both.

Now we are entering into a new area of responsibility. AGC, for example, has language in one of its contracts stating that the design/builder “shall exercise reasonable skill and judgment in the performance of its services.”

In other words, there may be liability if the system does not perform properly, even though there are no defects in workmanship or materials. Such a broadened exposure may be further bolstered by the owner’s indemnity clause.

As set forth in DBIA’s design-build contracting guide: “The challenges of developing fair and reasonable contract language to document a design-build relationship can be significant.” Particularly in the gaming and hospitality industries, understanding the language of the agreement is not a task for the inexperienced.

ITTIG, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at 202.387.5508, [email protected] or www.ittig-ittig.com.