Precast Consulting Service
Finance, Marketing & Operations

We provide for the complete Project Management process including:
2. Contract Negotiation
Key Considerations

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 like.

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 This 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.
  1. 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 of escalator.
  2. 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 PCI Contracts Committee has done good work in this area.  Here are three excellent resources

What can Precast Consulting do?

  • Review contracts    We can suggest ways around each of the above typical problem areas.  We review contracts and provide management advice about alternatives that work for the producer and are typically acceptable to the contractor or owner.
  • Seminar    We can put on a seminar for those reviewing and approving contracts.  The outcome of that seminar will be a common understanding of what your company wishes to do about typical contract problems such as the above.  The seminar is conducted from the basis of what has worked for others.
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    Management professionalism for the Precast Industry