What contract language are you having success negotiating, and what language isn’t successful?

April 2016

Depends. Or to paraphrase Abraham Lincoln’s famous quote, “You can get all the changes some of the time, and some of the changes all the time, but you cannot get all the changes all the time.” We have found that reasonable language modifications, regardless of the issue, presented in a respectful and professional manner, are generally better received by our customers. The less adversarial our approach, the more open and understanding the GC in negotiation—but there are exceptions. Typically, we address contingent pay, indemnity, venue/prevailing law, overtime, damage to our work and liquidated damages, but it’s difficult to pinpoint which issues we succeed or don’t succeed in negotiating because the key variable here is the GC and whether it is going to be reasonable and fair or not. In the case of the latter, we have to look at the character and past projects of the GC as well as the particulars of the current job. So, it depends.
—Steve Winn, Corporate Credit Manager, Marek Brothers Systems, Inc., Houston, Texas

Successful negotiating retainage bond in lieu of retainage. Not successful with eliminating pay if paid.
—Anonymous

As a general rule they don’t allow the boiler plate to be modified with the exception of items that are not applicable to the project or our scope, i.e., bonding, liquidated damages. In some instances we are able to strike the verbiage bonding us to the terms and conditions of the prime contractor with the owner, which we rarely see or have access to. Typically there is no problem making changes to scope of work and documents to accurately reflect information provided, and scope as reviewed and agreed upon. We also do this during the leveling process by discussing these items with our clients and modifying leveling sheets which become part of the contract.
—Anonymous

We were successful in negotiating a two year pay freeze with the Painters in the Indianapolis market. This was driven by recent right to work legislation as well as the abolishment of a prevailing wage on public projects. As a tradeoff, all existing language in the CBA remained.
—Anonymous

Most contract language is negotiable, just depends on client’s rigidity and willingness to work through issues.

There should be some common ground where both parties can meet. Most difficult to negotiate is the very popular “paid if” or “paid when” clause; most clients are not willing to remove this from the agreement. There are other options to amend the clause in your favor. If adding language that limits the time frame for payment, it will help with arguing the case in court if it should ever become a problem and go to court. However, the one item that seems the most difficult for us to work around is the payment terms (length of time). Regardless what the contract stipulates we inevitably have to wait longer to receive payment than indicated in the agreement.

Least difficult, and something we try to make sure is clear prior to signing the contract, is our labor rates and markup on change orders. This is as easy having a standard rate sheet in place and request that it become part of the agreement (every agreement). Most clients don’t have an issue with this, especially since they now will know what to expect when having your firm perform additional work—removes most of the ambiguity.
—Anonymous

Here are a couple thoughts:

  • We try to strike the clause, “subcontractor will perform all work associated with this scope, whether or not it is shown in the drawings or specifications, but in accord with the designer’s intent." It helps to have a degree in psychology to address this one, but joking aside, are we to read the designer’s mind?
  • Another onerous clause is, “subcontractor will hold the indemnitees—owner, architect and general contractor/construction manager—harmless for death, injury or damage, whether or not the indemnitees are actively or passively negligent.”

I doubt that this clause would hold up in a court of law, but you’d be nuts to sign up for it.

  • For some time now, we’ve been willing to agree to waive our right of subrogation except for workers’ compensation.
  • It is common for contracts now to say that we have to provide a person for every 10 employees we have on site, eight hours a week, for composite crew cleanup of the site. Of course, this is not shared on bid day, only when the contract is proffered.

It would make no difference whether you keep your work areas meticulously clean and neat, but you’re required—if you sign for this—to clean up everyone else’s mess. There was a time when there were general contractors who had workers—carpenters, laborers—on site to handle their scope busts and for general cleanup—not so much today.
    
I just read this one in a contract for a job we’ve already started. I don’t think I’ll agree to it: “Subcontractor shall be responsible for any costs, including attorney’s fees, incurred by Contractor as a result of a breach of this Subcontract Agreement or any dispute arising out of or related to this Subcontract Agreement or the Project, whether or not such expense is incurred before or after litigation is commenced.”
    
The real pity is not so much that subcontractors are subject to such abuse, but that many subcontractors don’t read the contract!
—Rob Aird, President, Aird Incorporated, Frederick, Maryland

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