Wednesday, April 17, 2024
ContractsTraining and Education

Non-Standard Contract Clauses Workshops Final Reports

One of Alberta Construction Association’s (ACA) mandates is to support industry standard contracts.  Recognizing that the vast majority of public construction projects use different forms of non-standard contracts that are often developed by the issuing body, ACA recognized it would be good membership value to bring awareness to all industry partners about the risks associated with these non-standard contract clauses.

With funding from Alberta Economic Development, ACA with its partner Associations, Calgary Construction Association (CCA), Edmonton Construction Association (ECA) and Red Deer Construction Association (RDCA) developed initiatives to support small to medium sized Contractors by improving their understanding of risks in commercial construction contracts. 

Phase I Workshops (Non-Standard Contract Clauses – “Can You Afford to Ignore Them”) were held in 2018 in which mixed sector participant groups including General Contractors, Subcontractors, Insurance/Bonding Specialists and Lawyers.  To determine the financial implications of clauses obtained from a variety of recent public Alberta projects, the groups were given a mock project and tasked to submit bids based on the information provided. Results of the mock tender indicated bidders add significant costs to cover risk.

Ultimately this all boiled down to the value of Standard Contracts with standard language at all levels of the contract chain.  Standard language helps us to communicate and collaborate for better understanding to address the risk.  See Final Report for Phase I – November 5, 2018 for details of the results.

In May 2019, Alberta Construction Association (ACA) and its partner Associations, Calgary Construction Association (CCA) and Edmonton Construction Association (ECA) hosted Phase II Workshops (Non-Standard Contract Clauses Workshops – “Building Trust for Successful Projects”). 

These Workshops were created to foster collaborative discussions among industry partners which in addition to those partners from Phase I included:  Project Owners, Architects, Specification Writers, and Engineers.  The significance of this Workshop was having ALL INDUSTRY partners working together to go through similar exercises in Phase I. 

What was overwhelmingly consistent from both Workshops was the value of all the partners participating in discussion over the whats and the whys of each clause in a respectful, quiet and thoughtful environment without a tender closing looming in the background.  The process reinforced the value of collaborative conversation in our project delivery methods; it was “healthy and refreshing”.  See Final Report for Phase II  for more details.

The industry recognizes there will always be the need for supplementary conditions due to project specific needs.  However, when clauses are created that simply transfer the risk down the line from Project Owner, to General Contractor, to Subcontractors and Suppliers, we likely haven’t assisted in the solution, but rather created potentially larger problems because the last sector in the chain is the least likely able to manage many of these clauses. 

Fostering of collaborative environments will help move the industry to transparency, honesty, trust, fairness and respect – the foundations of ethical behaviour.  Building on trust will help ensure successful projects; without trust and other ethical behaviours, our projects will continue to be challenged. 

So, the real question is can changes be made to onerous non-standard clauses? Change can only happen if there is a recognition that change may be needed.  What is strongly evidenced by these Workshops is that discussion on clauses needs to involve all partners in a safe environment.  Through collaborative dialogue with expertise from all partners, clauses can be created that address the Project Owners concerns in a fair and transparent manner.

Construction and Design Associations are poised to be the catalysts to advocate for standard contract language, creation of balanced supplementary conditions and further Workshops to foster understanding by all partners.  Non-standard clauses and understanding their implications is not just an Alberta challenge; workshops are scheduled in 2020 at Vancouver Regional Construction Association, Winnipeg Construction Association and Northern Regional Construction Association (Prince George).  As noted by a Workshop participant, “There was great discussion around us having the ability to change!”