Precast Consulting Service
Finance, Marketing &
We provide for the complete Project
Management process including:
2. Contract Negotiation
Delegation of authority
Top management should not take time to read contracts.
This should be the primary responsibility of project management, with training
and a specific delegation of authority. Project management should
be provided with standard language to meet typical omissions such as access
and getting paid for stored materials; typical exceptions such as pay-upon-pay;
and typical strikeouts found in notification or indemnity sections.
Authority should not be delegated to approve certain language such as liquidated
damages, failure to be paid for stored materials, credit terms, and the
Legal involvement All
contracts above a threshold amount should receive automatic legal review.
But, legal review is not a substitute for project management. Your
lawyer will typically not find omissions such as access, or recognize impractical
arrangements for change orders. backcharges, and notification. Contract
terms are too important to delegate to your lawyer.
Dealing with Onerous Clauses
is a list of the typical problem areas for the producer. A detailed
legal review is available below.
Escalator clauses The
volatile price of reinforcing steel has fostered the need for escalator
clauses. In long lived contracts (beyond say 6 months), you
really must convince the owner or GC that an escalator is preferable to
a risk premium in the bid. Remind your customer that, if prices go
down, the escalator will work in their favor. These contract clauses
come in two varieties.
is often accompanied by "condition precedent" language. There are
several ways around this that work for the GC and work for the producer.
Access This is a
typical omission. The GC owes the producer access to the job site
for the crane and delivery vehicles. That means they should be able
to proceed to the place of erection under their own power. The reach
and required crane size should fit your plan. Reach and access should
be written into the contract.
Extra work This is
typically not well clarified regarding charge backs and verbal changes.
Offsite storage is typically excluded but it is essential to the producer.
I suggest that you do not accept a contract unless it provides payment
for offsite stored materials and pays yard rent if the job is delayed.
If you have the right delivery schedule and price, my experience is that
payment for offsite storage can be worked out.
Indemnity This is
typically one sided. Click on the detailed legal review below.
Termination In the
event of termination for convenience of owner, as the producer you want
to recover all your costs, offsite as well as onsite. Typically a
contract is limited to costs incurred on the job. What about special
purchase materials. What about forming? Does the contract include
Retainage This is
the time to negotiate partial or complete payment of retainage earlier
than the date of substantial completion.
I suggest that you do not accept any liquidated damages clauses.
Strike them out. This could be a walk away item. If you have
the right delivery schedule and price, my experience is you will not be
asked to walk away.
The PCI Contracts Committee has done
good work in this area. Here are three excellent resources
Price index escalators adjust contract
price based on a published index. These are imprecise but easy to
administer. There is no agreement on the best index to use. Engineering
News Record publishes a construction steel index. Don't use scrap
steel price, it is way too volatile. It is best to avoid this type
Quoted steel price based on your actual
steel invoices vs. your quote at bid time. These are the fairest
in theory, but are subject to bidding games and thus contract administration
problems. This method is best for the producer and should be included
in all long lived negotiated work.
The Top-10 Contract Provisions. Prepared
by lawyer Brad Parrott and presented at the 2004 PCI Convention.
Includes negotiating tips. This is an excellent reference. click
Gate Precast presented an excellent Powerpoint
on contract language at the 2004 PCI Convention. Click
here. this may take a few minutes to download if
you have a low-speed line.
PCI review of the AGC Standard Contract. click
What can Precast Consulting do?
for the Precast Industry