1. Construction Contracts By: David Adelstein 1

2. What Contract Should I Use? Objectives (1)What are my design and construction objectives? Project size, location/ site, complexity and scope? Horizontal or vertical? Contractor input on frontend (contractor’s management skills/ preconstruction expertise)? Budgetary, financing, and schedule constraints? Lean construction (minimize waste and time)? Risk allocation including dispute resolution? In-house resources? Owner level of control? Sustainability (LEED)? Technology (BIM)? Collaboration? Insurance? End users? Industry trends? Contract administration (who is going to perform this task)? 2

3. What Contract Should I Use? Project Delivery Method (2) What is the project delivery method – best method to allocate design & construction? Project delivery method will dictate the risks and party best equipped to manage and assume risk (e.g., the equitable assumption / assignment of risks) 3

4. What Contract Should I Use? Project Delivery Method Project Delivery Methods (a)Design-bid-construct (b)Design-build (c)Engineer-procure-contract (e.g., lump-sum/turnkey) (d)Engineer-procure-construction management (e)Construction manager-at risk (f)Construction manager-agency (g)Integrated project delivery (h)Public private partnership 4

5. What Contract Should I Use? Standard Form Contract (3) Based on objectives and project delivery method, should I use a standard form contract? The answers to questions (1) and (2) will help determine the relevance and practicality of standard form contracts / contracts created by industry trades and professionals. The answers will help determine which contract and corresponding exhibits to utilize. 5

6. What Contract Should I Use? Standard Form Contract (1) American Institute of Architects (AIA) (have architect’s concern in mind, but drafted by committee composed of industry professionals in design, construction, law and insurance) (2) ConsensusDocs (drafted by coalition of industry associations, e.g., Associated Builders & Contractors, Associated General Contractors of America, American Subcontractors Association, Construction Financial Management Association, National Association of Women in Construction) (3) Engineers Joint Contract Documents Committee (EJCDC) (drafted by coalition of 3 engineering associations: American Council of Engineering Companies, American Society of Civil Engineers, & National Society of Professional Engineers) (4) Design-Build Institute of America (DBIA) (focus is on design-build project delivery) (5) International Federation of Consulting Engineers (FIDIC) (coalition of international engineering associations) (standard form EPC/Turnkey contract known as the Silver Book) 6

7. What Contract Should I Use? Standard Form Contract Pros Provide a template to finalize contract Familiarity with organization and contract Familiarity with terms used in contract Familiarity with standard risk allocation (and perhaps court decisions interpreting certain provisions) Cons Wrong template may not fully integrate objectives and type of project delivery method Modifications still NEED to be made (legal compliance, right preservation, risk allocation, etc.) Modifications require global review to ensure modifications do not conflict with another provision 7

8. What Contract Should I Use? Standard Form Contract = Template No matter what standard form contract you utilize, the contract NEEDs to be modified to: (a) Comply with applicable law (b) Preserve & maximize rights under applicable law; and (c) Best allocate risk.  A standard form contract should operate as a template. 8

9. Risk Allocation What are the risks that may need to be allocated? Indemnity (for injury, sickness, death, property damage, hazardous materials, legal compliance with indemnity statute) Insurance (scope of coverage typically won’t be broader than contract, types of insurance, limits of insurance, builder’s risk, waiver of subrogation, primary and non-contributory, add’l insured status, continuation of coverage) Delays (liquidated damages, consequential damages, no- damage-for-delay, notice, definition of substantial completion definition) 9

10. Risk Allocation Payment (conditions precedent to payment, legal compliance with prompt payment law, right preservation under FL’s Lien Law or other applicable law re: payment bonds, right to withhold payment, stored materials, retainage, pay app review/approval, consent of surety) Change Orders (notice, proceeding with the work without signed change order, construction change directives, compensation for change including mark-up, disputed changes) Claims (notice, initial resolution [see also dispute resolution], differing site conditions) 10

11. Risk Allocation Force majeure (how is it defined, add’l compensation, add’l time, definition of unusually severe weather) Bonded Project (P&P bonds, subcontractor performance bonds, subcontractor default insurance) Termination & suspension (for cause, for convenience, termination damages, right to suspend, T for cause converted to T for convenience, assignment of subcontracts, ownership of documents) 11

12. Risk Allocation Dispute resolution (litigation, arbitration, conditions precedent, attorney’s fees, venue, project neutral or dispute resolution board, jury trial waiver, right to be joined in another dispute) Schedule (ownership of float, right to modify sequence and logic, right to accelarate, furnishing updated schedules) Priorites & conflicts (hierarchy of documents in event of conflict, conflicts with drawings & specs) 12

13. Risk Allocation Warranty (scope, length of warranty / correction period, consideration of statutory warranties such as FL’s Condo law) Construction defects (opting out of FL’s pre-suit construction defect notice procedure, does waiver of consequential damages apply, has money been escrowed or reserved) Use of digital / electronic documents (exchange protocol, licenses, ownership, indemnity, reliance upon) 13

14. Risk Allocation Demand for adequate assurance (proof of financial wherewithal, when can demand be made, types of financial info to be furnished) Delegation of professional services (performance specifications and value engineering of systems that require signed & sealed drawings) Subcontracting (ownership approval, use of lowest bid) 14

15. Risk Allocation Material inflation costs (change order, assumption of risk) Submittal and RFI review (response time, what does review of submittal mean: approval? conformance only?) Cost Control & Contingency (use of contingency, buy-out savings and VE savings, allocation shared savings, target cost, GMP, lump sum, cash flow forecasting and reporting) Commissioning of systems (start-up, performance testing, automation of control systems, turn-over) 15