me a cape and mask. I made the sword and I've been fighting villains ever since-I just wear different clothes.
The villains in this story are new generation subcontracts, which are nothing more than a disguise to fool subcontractors and shift risk. New generation contracts are up and coming, and I believe it's important for all subcontractors to be aware these new contracts are gaining popularity among GCs nationwide.
I just received one of these new contracts and I read every word, cover to cover. I must admit, I enjoyed reading every word and found it extremely interesting. The most interesting part of these contracts is how stealth the GC shifts more risk than ever before, while being less offensive than ever before. I use the word "stealth" because the contracts themselves remind me of a military documentary I watched about snipers. The camera was focused on a natural woodsy setting, where everything looked peaceful and quiet; then suddenly 20 snipers stood up, exposing themselves and their weapons to the camera.
Identify a new generation contract
It's easy to identify a new generation contract simply by looking at the list of attachments included in the main part of the subcontract. It will look something like this:"The subcontract documents consist of this Subcontract Agreement terms and conditions attached hereto and the contract documents as defined therein, and the following attachments:
• Attachment "A":
Insurance and bonding
• Attachment "B": Document list
• Attachment "C": Scope of work
• Attachment "D":
Contract recapitulation
• Attachment "E": Billing procedures
• Attachment "F": Schedule
• Attachment "G":
Project procedures manual
• Attachment "H": Daily report
• Attachment "I": Safety
• Attachment "J":
Quality assurance and so forth ..."
Notice that the GC used four simple words (and the following attachments) to tie several "attachments" to the subcontract. Tying attachments to subcontracts is not new, however, there is something new you may not be aware of.
In the case of the attachment list shown above, the GC is tying attachment "G" to the subcontract. This attachment is referred to as the project procedure manual. The first page of the manual states, "Items in this manual supplement and expand upon issues addressed in the Subcontract Terms and Conditions and other contract documents, which should be reviewed in conjunction with this manual."
The manual does exactly what it is intended to do, "supplement and expand upon the subcontractors' original bid." Consider the possibility that you competitively bid a job per plans and specifications, and the low GC sends you a contract that expands upon the plans and specifications you originally bid. The question for subcontractors to ask themselves is why would he sign a contract that expands upon his original bid. The reason subcontractors will sign a contract like this is because it's carefully disguised.
In the case of the project procedure manual, it addresses the following issues:
• The purpose and use of the manual
• Correspondence
• Submittals
• Coordination of the work
• Material procurement
• Protection of materials and installed work
• Field operations
• Changes in the work
• Record documents and project close out
• Quality assurance
• Site rules and regulations
• General contract references
• Exhibits
The GC in this case used the manual to "expand" upon the original plans and specifications, as well as adding additional language, which only benefits and better protects the GC. As well, the manual is carefully designed not to lessen the subcontractors' risk by the addition of a phrase that requires the subcontractor to be bound to the "most strict" language contained in all the documents, including the documents between the owner and GC.
I don't have enough space to give more than a few short examples of how the manual expands the subcontractors' risk but as an example, the manual makes it the subcontractors' responsibility, "To review and or request shop drawings, cut sheets or other data on installation or equipment of other trades that may affect their work so that they may properly coordinate their work with others. Failure to do so will prevent the GC from giving subcontractor assistance and the subcontractor will be responsible for any additional costs due to lack of coordination."
The particular manual I reviewed was far stricter than the specifications I had originally bid. The manual expanded upon, "disputed work, change orders, extra work, payment, backing, utilities, cleanup, communication, supervision, daily reports, protection, credits for material not used by subcontractor, cutting and patching, as well as a hundreds of other items."
Not only does the manual require the subcontractor to be responsible for correct ceiling height elevations, it also makes the subcontractor responsible for the "clearance between the correct ceiling height and the structure above to ensure that whatever is going in above ceiling height will fit."
The manual also expanded upon the original caulking and sealant requirements. The manual requires that the subcontractor be responsible for all acoustical, architectural, fire, smoke, and weatherproof caulking and sealant within and adjacent to their work.
The manual was obviously prepared by a very competent person whose job it was to address every conceivable issue that may give rise to an increase in the GC's risk. Keep in mind that someone went to this document creator and asked him to create a document that will greatly reduce the risk of a GC. The manual was created to benefit the GC. You didn't have the manual at bid time and you didn't bid the terms and conditions outlined in the manual but the GC simply slips it in as part of your subcontract.
Quality Assurance program
The Quality Assurance program is made part of the subcontract by also making it an attachment. In the case of a Quality Assurance program, the language reads as follows:"A condition of each subcontract agreement will be a commitment from the subcontractor, their trade foreman, tier subcontractors and suppliers to comply with the spirit and intended goal of the program. As an additional quality assurance measure, field supervisors and project managers shall complete the attached, Quality Assurance form for each area of work as soon as their work is complete and return it to the GC."
The form itself contains a statement that in plain English means that a person is responsible for the job and gives personal assurance and a professional guarantee that all the work is complete and meets/exceeds the requirements of the industry and contract documents. I've personally reviewed the work and quality, and have reviewed it in total, and I'm satisfied that it meets all quality standards of the GC, architect and owner.
The GC in this case wants the responsible foreman to provide a document indicating that the work is complete. To put in writing that an area is complete should be limited to the work you perform. The language is vague because it addresses "all" work, which could indicate the work of the trades before you. The language also assures the GC that the work was completed per the requirements of the industry. What is industry standard? If industry standard is how a job is measured then the term "industry standard" must be qualified as to what it means in the contract. As well, how can anyone be sure that the quality meets the standards of the GC, architect and owner? Maybe the GC has low standards, the architect high standards and the owner even higher standards? What are their standards?
Every person in the United States loves raw fish and I'll sign a document that proves it. In my opinion, the only reason the GC wants the subcontractor to sign off is to limit the GC's risk. It has nothing whatsoever to do with quality, it's simply a new disguise in the GC's effort to shift more liability toward the subcontractor.
GC responds
After reading the new generation contract, I called the GC to talk to him about it. I explained to the GC that many of the attachments to my subcontract expand my responsibility, as compared to the original competitive bid documents. The GC replied that the attachments are standard company contract documents that every subcontractor signs.I went on to say how nice it would have been to have these documents prior to the bid so I could add dollars for the additional risk. I also explained that I gave his company the same price I gave to the other bidders who don't require the attachments. However, I did point out that my bid qualifications require that we receive a mutually acceptable subcontract and this contract is not acceptable.
The GC then said he would have to talk to the higher-ups and get back to me, and that he didn't think upper management would negotiate any of the contract requirements-especially the project procedure manual.
I know of another GC who is using a similar new generation contract. However, this GC advises its subcontractors in advance of the bid that they will not accept any contract modifications. That's the fair way of doing it and it gives the subcontractor the opportunity to increase its price based on the level of risk. There is a lot learn about new generation contracts and I hope to pass along what I'm learning, as well as who's behind the creation of these villainous documents.
Keep in mind that new generation subcontracts come in many disguises and are nearly as stealth as a B1 bomber or a camouflaged sniper. The contract documents blend together so well that they appear no more harmless than any other subcontract. Yet, if Zorro were still around, he would do battle with the contract conspirators with a sword in one hand and a smile on his face, making sure that everyone got the point.
Remember: Teamwork begins with a fair contract!
