Understanding and Negotiating Construction Contracts: A Contractors and Subcontractors Guide to Protecting Company Assets

Understanding & NegotiatingConstruction Contracts Kit Werremeyer A Contractor′s & Subcontractor′s Guide to Protecting Company Assets A practical desk reference to help identify and evaluate risky commercial terms and conditions, then negotiate or get help to resolve them. Construction is a complex business. Each project has its own unique physical and commercial considerations. Since there′s no such thing as a "standard" or "typical" construction project, construction contracts should not be looked on as standard either. They must be carefully managed in order to have a successful outcome and to protect the company′s interests and assets. This book will show you how to identify, understand, and evaluate high–risk terms and conditions typically found in construction contracts—then negotiate to lower or eliminate the risk, improve terms of payment, and reduce exposure to claims and disputes. You don′t have to be a lawyer to understand the risks and to be able to negotiate better and less risky commercial terms and conditions. The author has written this book without using "legalese," instead providing real–life examples you can relate to from actual projects????—from small residential and retail to large commercial, industrial, and international work. This book will help you manage all these elements of the contract: Scope of Work & Schedule Terms of Payment & Cash Flow Assurances of Performance Insurance, Bonding, Indemnity, & Warranties Changes to the Contract Disputes & Their Resolution Damages Termination & Suspension Force Majeure International Contracting About the Publisher: RSMeans is the foremost source of construction cost information in North America, with 27 annual cost data products, a nationwide seminar program, and consulting services. Means also offers a library of reference books on construction estimating, project management, and many other topics.

Acknowledgments. About the Author. Preface. Disclaimer. Introduction. The Goals of This Book. What Are the Benefits of This Book. Contractor & Owner Conventions. Private Contracts or Government Contracts? Key Contracting Concepts. Two Types of Commercial Terms & Conditions. The Most Important Commercial Terms & Conditions. The Contracting Process. Excuses for Not Negotiating Better Commercial Terms & Conditions. The Concept of Risk Transfer. This is a Book Developed Just for Contractors. Chapter 1: Contracts: Basic Training. What Is a Contract? The Steps to a Contract. Coming to the Party? The Starting Point. “Here’s My Proposal”. “Consideration,” or Something of Value. The “Happy Test”. “Can That Person Sign Th is Contract?”. Call in the Enforcer To Close the Breach. A Contract Example. Strange Words & Long Paragraphs. Contracting Myths. Contract Negotiations. Chapter 2: Types & Forms of Contracts. Fixed Price & Fixed Schedule Contracts. Reimbursable Type Contracts. Combined Fixed Price & Reimbursable Contracts. Cost Plus Fee Contracts. Guaranteed Maximum Price Contracts. Target Price Contracts. Contracts with Performance Incentives. Form of Contracts. Some Final Contract Housekeeping—Definitions. Conclusion. Chapter 3: Scope of Work. The Scope of Work Matrix. Scoping Drawings. Conclusion. Chapter 4: Terms of Payment & Cash Flow. Cash Flow. Interest Rates. Periodic Progress & Milestone Payments. Conclusion. Chapter 5: The Schedule. Float. Time Is of the Essence. Extra Time, but No Money. Conclusion. Chapter 6: Assurances of Performance. Guaranties & Bonds. What Does “Failure to Perform” Mean? What Is a Bond? Forms of Assurances of Performance. Surety Companies. Some Language Considerations on Guaranties & Bonds. Types of Performance Assurances. Conclusion. Chapter 7: Insurance. What Is Insurance? Claims Made vs. Occurrence. Types of Insurance. Important Issues Associated with Insurance. Additional Insured Status. Additional Insurance Basics. A Typical Insurance Clause in a Construction Contract. Safety. Chapter 8: Indemnity. Insurance & Indemnity. Indemnity Definitions. Transferring the Owner’s Risks to Contractors. Fairness Is Not a Consideration. Is an Indemnity Required in a Construction Contract? Anti–Indemnity Legislation. Examples of Indemnification Clauses. Indemnification, Additional Insured Status, & Contractual Liability Insurance. Owners Love CLAIMS! Negotiating Indemnity Clauses. Knock–for–Knock Indemnities. Conclusion. Chapter 9: Changes. Some Ground Rules. Protecting the Project Manager. Owners’ Directives. Constructive Changes. Payment for Changes. Sample Change Clauses. Major Contract Changes. Negotiating Change Clauses. Conclusion. Chapter 10: Disputes & Their Resolution. What’s a Project Manager To Do? A Short Story To Start With. Disputes—The Construction Contract’s Bad Actor. An Ounce of Prevention. Dispute Resolution Options. The Folks Who Negotiate, Mediate, Arbitrate, & Litigate. Dispute Resolution Clauses. Conclusion. Chapter 11: Damages. Breach of Contract/Failure To Perform. Contractors’ Financial Exposure. Actual Damages—A Silent Risk? Liquidated Damages. Consequential Damages. Conclusion. Chapter 12: Warranties. A Workable Definition of Warranty. Warranty Issues. Th e Uniform Commercial Code. When Is No Warranty Appropriate? Extended Duration Warranties. Limiting Provisions in Warranties. Pass–Th rough Warranties. Latent Defects & Warranties. A Sample Warranty. Conclusion. Chapter 13: Termination & Suspension. Termination for Cause. Termination for Convenience. Suspension. Cancellation. Conclusion. Chapter 14: Force Majeure. Negotiating Clauses. Sample Contract Language. Conclusion. Chapter 15: Other Contract Clauses. Site Conditions. Use of Completed Portions of the Work. Patent Indemnity. Secrecy & Confi dentiality Clauses & Agreements. Owner’s Right To Inspect. Independent Contractors. Assignment. Acceptance & the Punch List. Advance & Partial Waiver of Liens. Final Waiver of Liens. Audit Rights. Severability or Validity Clauses. Venue & Applicable Law. Some Interesting Clauses to Close. Chapter 16: International Contracting. International Contracts. Th e U.S. Foreign Corrupt Practices Act. Letters of Credit. Split Contracts: Onshore & Off shore Contracts. Political, Religious, & Economic Risks. Overseas Private Investment Corporation (OPIC). Legal Systems in Foreign Countries. Local Employees, Partners, & Agents. Off shore Companies. Currency Risks. Applicable Law. Joint Ventures. Joint Operations. Import & Export Considerations. Understanding INCOTERMS. Th e Export–Import Bank of the United States. Where to Get Some Help—Ask the U.S. Government. Lastly, Use the Right Paper Size! Conclusion. Chapter 17: Some Final Th oughts on Negotiating Contracts. Why Negotiate? Th e Concept of Standard Terms & Conditions. Risk Transfer Item 1: Get Rid of the Indemnity Clause! Risk Transfer Item 2: Don’t Provide Additional Insured Status. Risk Transfer Clauses, Insurance, & Safety. How to Say No Without Aggravating the Owner. The Worst Contracting Word: “Reasonable”. Th e Best Contracting Word: “Notwithstanding”. Win–Win & Lose–Lose in Contract Negotiations—Fairy Tales? Is There a Price for Bad Commercial Terms & Conditions? Terms of Payment. Some Tips on Successful Negotiating. Th ree First (and Final) Suggestions. Resources. Glossary. Index.

About the Author: Kit Werremeyer is the owner and president of Southernstar Consultants LLC, of Valrico, Florida, a provider of training in construction contract negotiations and management and other services for U.S. and international engineering and construction companies. He has more than 30 years′ experience in international sales, contracting, claims settlement, dispute resolution, and EPC project development, including work for major companies such as Bechtel, Kellogg Brown & Root, Fluor, J.A. Jones, Black & Veatch, DuPont, Shell Oil, Exxon/Mobil, BP/Amoco/ARCO, and many others.