Sunday, June 23, 2024

Non-Standard Contract Clauses – Can You Afford to Ignore Them?

Alberta Construction Association (ACA) promotes adoption of standard “CCDC” forms of contract by owners. Numerous public-sector owners have been reluctant to adopt standard CCDC contracts. This lack of adoption creates an issue lack of true understanding of the terms and conditions of the non-standard contract.

Many small to medium sized contractors don’t have access to in-house or cost-effective legal expertise to help them price in their bids the risk they are obliged to absorb from non-standard commercial construction contracts. These contractors and their employees face significant risk to their continued operations due this lack of understanding.

ACA received funding from Alberta Economic Development for an initiative to support small to medium size contractors by improving their understanding of risks in commercial contracts.  The funds will be used to contract with the expertise required to:

–      Collect, analyze, and publish the risk and cost implications of terms frequently found in commercial construction contracts in Alberta

–      Publish and disseminate the findings of the analysis

–      Support workshops or other discussion forums to review findings of construction value chain stakeholders, including owners, consultants, and contractors

–      Develop new or add to existing educational seminars for Alberta contractors to educate contractors

–      Develop an online repository of the preceding and recognize those who use standard contracts in order to sustain the initiative

As a first step, a committee of contractors led by Mike Nicolson, Vice President, EllisDon identified onerous clauses frequently present in commercial contracts issued by public owners in Alberta.  This report formed the basis for the second step: to gather information on what these clauses mean and to determine the impact these clauses have on tender pricing.

ACA held the first sold-out “Non-Standard Contract Clauses Workshop – Can You Afford to Ignore Them?” on June 20, 2018 in Calgary.

What was the Workshop all about?  Led by Kees Cusveller, mixed sector participant groups (including General Contractors, Trade Contractors, Insurance Specialists and Lawyers) reviewed and presented their discussions on six common non-standard clauses.  To determine financial implications of these and other clauses, the groups were given a mock project that is typical of some of the projects being tendered.  This project’s front end specification only contained 15 clauses bearing on costs and groups were tasked to submit bids based on the information provided.  All tenders submitted had costs added to their bids based on risks assessed for these non-standard clauses.  All workshop participants learned through presentations of the rationale of each tender.

What did Workshop participants have to say:

“Best most informative seminar in a long time”

“High value especially considering attendance cost”

“Fantastic way to see contracts from a variety of industry opinions/standpoints”

“There are many contract clauses in the industry that create or transfer risk to parties that may not be aware or able to absorb them without costs”

“Very good presentation; all owners of subtrade companies should take this workshop”

The next Workshop will be held on October 4, 2018 in Edmonton.  It will create more dialogue to create the final report to be presented to the ACA Board in November 2018. Registration information will be available this summer.

You can read more about Non-standard Contract Report here.