The vast majority of public construction projects use different forms of non-standard contracts often developed by the issuing body. Risk is frequently allocated contrary to the logic of assigning risk to the party best able to mitigate the risk. Often, the risk being transferred to the Contractor is unquantifiable and/or uninsurable, or beyond the reasonable control of the Contractor.
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 construction contracts.
Four Phase I workshops were held in 2018 in which mixed sector participant groups (including General Contractors, Subcontractors, Insurance/Bonding Specialists and Lawyers) reviewed and presented their
discussions on six common non-standard clauses. To determine financial implications of these types of clauses and other clauses, the groups were given a mock project that is typical of some of the projects being tendered in Alberta. This project’s front-end specification only contained 15 clauses intentionally including a few that should have no bearing on costs. All clauses utilized in the Workshop were obtained from a variety of recent public Alberta projects. Groups were tasked to submit bids based on the
information provided. Results of the mock tender indicated bidders add significant costs to cover risk.
While Phase 1 increased awareness among contractors, participants urged a second round of workshops to bring the perspectives of Project Owners and Consultants. On May 30 in Calgary and May 31 in Edmonton, Alberta Construction Association (ACA) and its partner Associations, Calgary Construction Association (CCA) and Edmonton Construction Association (ECA) hosted Phase II – Non-Standard Contract Clauses Workshops – “Building Trust for Successful Projects”.
The Workshop was created to foster collaborative discussions among industry partners: Project Owners, Architects, Specification Writers, Engineers, General Contractors, Subcontractors, Bonding and Insurance specialists and Lawyers. The goal of the Workshop in the morning was to analyze the risk associated with selected clauses and how the teams would accept or mitigate the risks. From the mock tender exercise in Phase I, the participants reviewed whether or not there was a financial implication to
each clause. In the afternoon, different clauses were selected and each team discussed what the clause meant, what the Project Owner was trying to resolve, the implication of the clause to the construction bidders and how the clause may be modified.
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”.
Whether you are the Prime Consultant, the General Contractor or the Subcontractor, the request for standard contracts will remain important, because as the Workshop reinforced, all participants want to be trained on what clauses mean. It is very difficult for everyone to reach an understanding of clauses when each Project Owner’s or General Contractor’s contract has different clauses on the same project
or differ from one project to the next project. There is no time at the bidding stage to become an expert on the contract terms especially in cases when you can’t even get your hands on the contract!