September 2007, this new industry option for contract documents may produce a true partnership-driven transformation among all parties. That’s no small feat, yet part of the promise lies in the industry development and buy-in from 21 associations representing everyone from owners to general, specialty and subcontractors.
“It spreads and mitigates the risk across the project instead of passing it down to the specialties and subcontractors,” said Dale “D L” Smith, founder of D L Smith Electrical Construction Inc. in Topeka, Kan. Smith served as a National Electrical Contractors Association (NECA) representative as the Consensus-DOCS program was being finalized and reviewed and voted on the final documents.
“Each contractor accepts the responsibility for those portions of the project [of] which he or she has control,” he said. “Project delivery is more equitable. NECA members have a contract vehicle that can be very good to them.”
ConsensusDOCS aim to represent the best interests of everyone involved in the name of project success. Electrical contractors joined their construction counterparts to draft, edit and finalize these 70-plus documents, so they employ best practices and fair risk allocation for all parties. Such rare industrywide commitment was truly revolutionary.
Dan Walter is the vice president and chief operating officer for NECA. In describing ConsensusDOCS impact, he said, “Say the electrical contractor [EC] is working five jobs, each less than 100 days and representing 50 to 60 projects. That EC is faced with paperwork large and small that legally governs each project. The contracts and forms from owners or general contractors have been either initiated from a local authority or self-crafted years ago. That’s a lot of homegrown documents often altered multiple times with changes handwritten in the margins. It’s no wonder the EC, often brought in late to a project, faces confusing and arduous paperwork.
“ConsensusDOCS should give owners and general contractors a contract they are comfortable with, requiring fewer changes because they were devised and agreed upon by NECA and the other construction industry associations. It should mean lesser legal fees, fairer terms and better comprehension. Payment timetables will be up-front because they are spelled out on a specific Consensus contract. The documents can also be customized without altering their overall structure. That’s real progress.”
The National Association of Surety Bond Producers (NASBP) based in Washington, D.C., is one of the developers of Consensus-DOCS. Mark McCallum serves as general counsel and director of government relations for the organization. NASBP represents bond producers who issue bonds for contractors, subcontractors, specialty contractors and others, so when they go forward with bond work they get the needed surety credit. He said his organization was eager to join the ConsensusDOCS effort.
“We like to place bonds with contractors that come to us with good risk, based in part on good contracts,” McCallum said. “We think ConsensusDOCS are momentous. There’s a popular perception that construction is a fragmented industry not able to get its related parties together to rationally discuss how to apportion risk and proceed smoothly. Quite frankly, we were beside ourselves at how well everyone worked together to come up with these agreed-upon documents. I saw owners making sure payment flows made sense and having no problem seeing subs making sure terms were fair.”
For McCallum’s part and for the contractor, ConsensusDOCS represent the most extensive and significant library of bond documents available. They cover bid, payment and performance for almost every constituent and in any situation from standard to design/build.
“They are also written in simple language for anyone to understand,” he said.
How it works
ConsensusDOCS are online and segmented into six numeric series. Each series supports elements of a construction project. They are General Contracting (200 Series), Collaborative Documents (300 Series), Design/Build (400 Series), Construction Management at Risk (500 Series), Subcontracting (700 Series), and Program Management (800 Series).
The program is set up as a pay-as-you-go or a full-year subscription. Full subscribers have a choice of six programs: Complete Document Package, General Contracting, Design/Build, Construction Management and Program, Subcontracting, and Short Forms. Purchasing, downloading and sample documents are available through www.consensusdocs.org. Subscribers affiliated with the 21 sponsoring organizations enjoy a $200 discount on the Complete Document Package and a $100 discount on any of the other subscriber packages.
“Full subscribers can print out as many contract documents, as often as they like,” said Brian Perlberg, senior counsel for the Associated General Contractors of America (AGC). “Subscribers can also access any portion of the document, use functions such as a redline mark out and other editing functions. They can import material, add notes and insert basic party information once, which will carry across project documents.”
For those who don’t want an annual subscription but want access to select documents, there is “Meter Mode.” Users must create an online account with a deposit of $200. They then have the right to use, edit and share any document and pay only when the final documents are printed. Drafts are designated with a watermark and can be printed at no cost. A meter value chart for each document helps users estimate their costs. For example, an agreement typically costs $35, and an administrative form costs $5. Accounts can be replenished in $50 increments.
To access their ConsensusDOCS, users download a software program called DocuBuilder, allowing them to create, amend and customize the Consensus contract documents to fit their needs.
Spreading the word
Validation is a key to the success of ConsensusDOCS. To that end, AGC and the Construction Owners Association of America (COAA) agreed to fold their contract documents program into this consensus process. Perlberg describes the initial response by his association’s members as “overwhelming.”
“It’s better than we even hoped,” he said. “The synergy with COAA, [AGC] and the other 20 sponsoring organizations led to a number of people signing up. We offered our members a free upgrade from our existing contract program. This strength right out of the gate gives ConsensusDOCS a lot of traction and bodes very well for the future.”
What doesn’t change with ConsensusDOCS is the construction project hierarchy. Does that mean the electrical contractor needs to wait and find project partners that are using these documents? NECA’s Walter doesn’t think so.
“If ECs like what they find with ConsensusDOCS, one strategy might be to condition their bids to both introduce and promote the use of these documents,” Walter said. “For example, an EC’s submitted price on ‘project X’ can be contingent on coming to terms with the Consensus 750 subcontract. While one GC might say ‘forget it,’ another may just as likely say, ‘If it makes sense, let’s use it.’”
Walter feels a little preaching is needed to get the word out within the construction industry and those players who support it.
“Spreading the word is essential,” Walter said. “ECs feel they have little choice contractually when they get involved in a project. How great to learn about Consensus-DOCS. Outreach is needed not just within the sponsoring organizations, but from the American Bar Association and the American Insurance Association to the American Institute of Architects. There’s a learning curve here for everyone.”
“Continual dialogue with the GC and other higher hierarchy trade members will be essential to acceptance,” Smith said. “Everyone needs to promote ConsensusDOCS from the top down in their respective organizations. It’s a sales effort that has to extend to architects and other players in construction as well.”
Though Smith hasn’t heard of any ECs yet using Consensus-DOCS, he estimates it won’t be long.
“When all partners on a project share responsibility, payment schedules, insurance, and risk, ECs receive a fair shake,” Smith said. “I know a number of contractors from other trades that are stipulating their bids be based on certain ConsensusDOCS.”
Walter anticipates contractual review by lawyers to be easier with ConsensusDOCS.
“Review will be that much simpler, as the lawyer knows that these documents are industry-approved,” Walter said. “They are also so well crafted and considered that most if not all questions are answered and they contain far less bias. I would add ConsensusDOCS do not alleviate the need for contractors to read and understand what they are signing.”
All parties agree acceptance and adoptability will be gradual. But all are confident in the quality of ConsensusDOCS and see them as answering a call for fair, clear and consistent contracts for the entire construction industry. According to Perlberg, a program review and an as-needed revision process will take place once ConsensusDOCS reaches its first anniversary in September 2008.
GAVIN is the owner of Gavo Communications, a marketing services firm serving the construction and the landscaping industries. He writes trend, design and other business articles.