PDCA contractor members long ago
ceased being “constructors” in the
traditional meaning of the word and
became “contractors.” As a result, PDCA
contractor members must not only be true
experts at building complicated subsurface
work, but must also be tremendously skilled
at negotiating the subcontracts for such
work. As a result, PDCA has established
a Contracts and Risk Committee led by
Alexander Filotti, M.B.A., P.E., the risk
controller for Underpinning & Foundation,
Skanska, Inc. and Richard D. Kalson, Esq.
of Benesch Law. It is our mandate to better
educate PDCA members on the tremendous
risks associated with complex contract
delivery systems with the help of our fellow
PDCA members through presentations
that will be made at PDCA chapter
meetings and annual conferences as well as
through magazine articles like this one. We
look forward to working with and learning
from as many PDCA members as possible
as we address this Herculean task.
When we review proposed subcontracts,
there are six critical items that we
immediately locate and analyze before
reviewing the remainder of the subcontract.
These items are indemnification clauses,
contingent payment clauses, notice clauses,
consequential damages clauses, no damages
for delay clauses and clauses that involve
risk assumed by the subcontractor that do
not involve the owner. The significance of
these clauses and proposed responses to the
same are discussed in greater detail below.
1. Your company complies with all contractual
notice clauses: During our
time in the construction industry, the
time to make a claim has decreased
from generous amounts of time such as
21 or 14 days to reasonably manageable
amounts of time such as seven or five
days to almost impossibly short notice
periods of 24 or 48 hours. Please rhetorically
ask at your next project management
or superintendents meeting if
your team can turn around a notice of
a differing site condition or any other
claim in 24 or 48 hours. Please put your
team in a position to succeed by negotiating
a notice period of no less than
three business days.
2. You will not agree to consequential
damages: Consequential damages
inherently include a limitless exposure
for items such as lost rent, lost profits
and additional financing costs, etc.
Therefore, consequential damages represent
a risk that is simply too large to
accept. While a good general contractor
will usually demand that an owner
expressly agree to waive its right to
recover consequential damages, PDCA
subcontractors must be equally vigilant
in their demand that a mutual waiver
of consequential damages clause be
included in their subcontracts.
What PDCA members need to know
By Alexander Filotti, M.B.A., P.E. and Richard D. Kalson, Esq.
PDCA CONTRACTS AND RISK COMMITTEE
Six Critical Subcontract
Items for You to
Seriously Consider
When Assessing Risk
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