The Construction Owners Association of America (COAA) is the largest association of construction owners in the United States. COAA just held its Spring Connect conference in downtown Baltimore on the University of Maryland, Baltimore (UMB) campus. One session featured “What I Love and Hate About Updating My Contracts from an Owners’ Perspective.” ConsensusDocs’ Executive Director & Senior Counsel Brian Perlberg spoke on a panel with Joe Cleves of Taft Law and Pen Wolf from the Cleveland Clinic.
Pen Wolf from Cleveland Clinic outlined the process he used to update his contracts recently. The Cleveland Clinic builds facilities annually and owns different facilities at different locations. The clinic employs over 75,000 employees. For an owner with a broad reach like the Cleveland Clinic, Wolf recommended using outside counsel with construction expertise to update contracts. He concluded that while it was a significant effort, the endeavor to update the Clinic’s contracts was absolutely worth the time commitment and expense. Wolf shared that updating the Clinic’s contracts has generated positive reviews internally and externally. Now their written agreements better reflect their business practices in their construction design and construction program.
At a fundamental level, the panel agreed that what kind of owner you are (and want to be) is reflected in your contracts. Outdated, nonstandard, cumbersome, and unfair contracts may not reflect the kind of owner you aspire to become. Some owners utilize overly protective contracts that aim to shift away almost all their risk, but those owners are in the minority. The Cleveland Clinic was attracted to ConsensusDocs because the documents encourage communication and collaboration among all parties to the construction process. In particular, the ConsensusDocs 300 Standard IPD Agreement drew his interest because the contract addresses culture and the utilization of lean construction tools and processes. Interestingly, Cleveland Clinic started with the ConsensusDocs IPD agreement first and is now finishing up updating all its contracts using ConsensusDocs. When the update is complete, all their contracts will use consistent terms and conditions to address design-build, construction management at-risk, and design-bid-build. Construction projects that do not benefit as much from value-added construction services and are less complex are more likely to use design-bid-build.
Joe Cleves of Taft Law addressed the advantages of using standard contract documents as the base (starting point) for an owner to update its contracts versus “bespoke” or “original’ contracts. Creating a bespoke contract is more time-consuming. Bespoke agreements are often riddled with conflicting and confusing provisions that do not help get projects completed on time or within budget, Cleves explained. The opposing party’s unfamiliarity with them pushes them to invest more time in scrutinizing the provisions and results in greater pushback. When he uses ConsensusDocs standard contracts as the base contract for updates, Cleves only needs to make a quarter or a fifth as many modifications compared to the more commonly used American Institute of Architects (AIA) forms. Cleves’ experience primarily draws from representing owners of construction projects in contract drafting and negotiations for over 30 years.
COAA has published comments to the ConsensusDocs. Some of those comments are on the ConsensusDocs website at www.consensusDocs.org/Guidebook. Additional comments are available to only current COAA members at www.coaa.org and access to these “COAA Gold Standard Comments.” These comments are featured prominently as a COAA member benefit in COAA’s membership recruitment information.
Overall, the panel discussed how there is more buy-in to the contracts when the updates are made collaboratively and with a mutually beneficial outlook. There also needs to be some controls between the home office and field personnel who negotiate contracts and change terms. It is important to log when changes are needed. Cleves commented that the sweet spot for comprehensive updates is typically five to seven years. Three years is probably too quick, and ten years is perhaps too long to wait for updates.
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