Avoiding Disputes and Driving Results with Better Contracts

Interactive Transcript

spk_0 Welcome to the Construction Leaders Podcast, where we explore ideas, strategies and conversations

spk_0 that are shaping the future of the built environment.

spk_0 I'm your host here today, Nick Soda, with Carly Trout, and whether you're driving to

spk_0 a job site, reviewing plans in the office, or grabbing a quick cup of coffee between meetings,

spk_0 we're glad you're here with us.

spk_0 On today's episode, we're going to talk about a topic that sits at the heart of every

spk_0 construction project.

spk_0 Contracts.

spk_0 And more specifically, how standardized contracts can actually help improve efficiency,

spk_0 collaboration, and outcomes on the job site.

spk_0 It's something that every program and project owner, contractor, and designer should care

spk_0 about, but not everyone fully understands.

spk_0 To help us unpack this, I'm thrilled to be joined by Shannon McElving, an expert in

spk_0 this area, with deep knowledge of the AIA Contract Documents Program.

spk_0 Together, we're going to discuss this, what standardized agreements are, how they work

spk_0 behind the scenes to keep projects on track, and how clear, collaborative, contract language

spk_0 can prevent disputes, clarify communication, and even support sustainability goals.

spk_0 So let's start off by learning a little bit about Shannon and her role, and then we'll

spk_0 dive into the contracts, influence everything from communication processes to the use of

spk_0 technology and complex resolution.

spk_0 Shannon, welcome to the podcast.

spk_0 You mind giving us a little bit about yourself?

spk_0 Thanks, Nick.

spk_0 So again, my name is Shannon McElving.

spk_0 I currently serve as the Chief Operating Officer here at AIA Contract Documents.

spk_0 I've been with the organization for about five years.

spk_0 I was part of the team that actually carved this business out of the AIA back in 2020.

spk_0 I came to ACD with about 20 years of experience in the construction industry on the finance

spk_0 side.

spk_0 I've sat in the controller role, in a CFO role, in subcontractors and general contractors,

spk_0 and I've also led the construction management function inside of two general contractors.

spk_0 I'm a proud Clemson Tiger.

spk_0 I have an accounting degree from Clemson.

spk_0 I tell everybody about that because go Tigers.

spk_0 I do won't hold it against you.

spk_0 That's fine.

spk_0 I've also worked in Fortune 100 companies.

spk_0 I spent about 12 years at Coca-Cola in Atlanta and have worked for Fuji Films.

spk_0 In my experience in business, the contract management and finance functions both play critical

spk_0 roles in project execution.

spk_0 In my mind, understanding the contract helps you understand the rules of engagement, the

spk_0 requirements of the owner, and those key milestones in communication process that set up a project

spk_0 for successful completion.

spk_0 When a team truly understands those important concepts or doesn't understand those important

spk_0 concepts, you can either keep a project for risk or set one up to fail.

spk_0 So I'm excited to talk to you today about the things inside of AIA contract documents

spk_0 that are established to help projects be successful.

spk_0 So we appreciate that background and you describing how you came to AIA contract documents program.

spk_0 But can you describe your current role in the AIA contract documents program as well as tell

spk_0 us a little bit about the program as a whole?

spk_0 Absolutely.

spk_0 So in my role as Chief Operating Officer, I am responsible for two key operations in the business.

spk_0 One of them is the content team.

spk_0 That content team is currently made up of six attorneys who work directly with the AIA documents

spk_0 committee.

spk_0 Together, we work to draft new content, update existing content to make sure that content

spk_0 incorporates current case law, changes in the industry, things that the AAC market wants to make

spk_0 sure are incorporated into those documents.

spk_0 Education department is also under the leadership.

spk_0 Why this is important to the content team is making the industry aware of what documents

spk_0 are available, how those documents are coordinated in families to make sure that whether you're

spk_0 the owner of the contractor, the architect, our consultant or subcontractor that you have

spk_0 the right language to participate in that project.

spk_0 We provide education in terms of classes that you can take, also thought leadership

spk_0 around how these contacts and forms are important to the industry and what it means to use

spk_0 that coordinated language.

spk_0 We also talk about how to mitigate risk from your perspective in that project.

spk_0 So those two key roles and departments are underneath my leadership.

spk_0 You asked me to explain about the program and I mentioned to you that we work hand in

spk_0 hand with the AIA Documents Committee.

spk_0 It's not just the content team or attorneys and the documents, many.

spk_0 We also work with industry liaisons.

spk_0 We'll talk about how in the last update of the construction management documents, we

spk_0 had people from CMAA, AACAs liaisons review and give comments back on documents because

spk_0 we want to make sure that the content that we deliver is actually needing the individual

spk_0 needs in the organizations.

spk_0 We use what we call a 10 year cycle.

spk_0 So from the time a document is published on our platform with guides, commentaries,

spk_0 instructions, all of those things, it takes several years for those to get incorporated

spk_0 and actually executed on projects.

spk_0 So think of from going all the way from going from the design contract to substantial

spk_0 completion when the contractor hands the project back to the owner, it could take 18 to

spk_0 24 months for our project to be completed.

spk_0 Then you'll see those projects, if there are disputes, go through the court system and

spk_0 case law is established.

spk_0 That can take two to three years for it to get from execution through the court system.

spk_0 So we want to make sure that there's enough time from the time the documents are originally

spk_0 written to there's actually experience in the court system to go back and review and

spk_0 edit those documents to make any necessary changes.

spk_0 That might come out of a dispute.

spk_0 Knowing that our documents are standardized templates, I mentioned to you earlier that

spk_0 we issue a guide.

spk_0 Not every project is the same.

spk_0 So our guides have language and then that say based on these circumstances, you might

spk_0 want to change this clause to this, you might want to consider these modifications based

spk_0 on your project specifications.

spk_0 With all of that going through the court system, then we start the process again to go back

spk_0 to the documents committee, the content team, and liaison to talk about, do those documents

spk_0 stand?

spk_0 Do they stand as they are or do we need to make modifications to them?

spk_0 That's a year long process to go through those task groups to make those changes.

spk_0 Then there's a process to republish those update guides and instructions and get them

spk_0 back to the market.

spk_0 So it's a very involved process to get those updated and back to the market.

spk_0 Same process happens when we issue new content.

spk_0 We meet internally, we meet with the documents, many and we meet with liaison in the industry

spk_0 to make sure we're capturing any of those new concepts that are out there.

spk_0 An example is a volumetric modular that we just issued this earlier this year.

spk_0 I want to dig into how contracts can lead to project efficiency, but I do want to go back

spk_0 and ask you a question on this timeline.

spk_0 So it sounds like 10 years is necessary, but in the ever evolving built environment,

spk_0 where things are changing rapidly, is it being looked at that 10 years maybe too long for

spk_0 standardized contract when you think of 10 years ago, AI didn't exist 10 years before that,

spk_0 smartphones didn't exist.

spk_0 What's going to be around in 10 years?

spk_0 I have no idea.

spk_0 Let me give you an example of how we've experienced that, Nick.

spk_0 Specifically with the BIM documents and design build,

spk_0 those two things have changed rapidly over the last 15 years.

spk_0 And so there's been iterations of the content much faster than the 10 year timeline.

spk_0 We've had multiple releases along the way.

spk_0 Standard content, if there's not rapid changes in the industry,

spk_0 you're going to see as pretty much stick to that 10 year timeline,

spk_0 but if there's things going on in the industry that are changing,

spk_0 you're going to see us adapt and release content on a much faster base.

spk_0 That sounds more efficient.

spk_0 So let's take that in and go into how contracts can lead to project efficiency.

spk_0 So if you think about contracts from the standpoint of

spk_0 and really establish the rules of engagement in a project,

spk_0 they talk about who's responsible for what timelines people are supposed to respond into.

spk_0 And the order of operations in order to get things done.

spk_0 I told you I was a construction CFO.

spk_0 And one of my favorite things that would happen is somebody walks on the job site and says,

spk_0 hey, I really don't like where that door is.

spk_0 I want you to move it 100 feet down the building.

spk_0 Can you do that today?

spk_0 And the superintendent obviously wants to do everything he can to please that owner.

spk_0 And so he acts without going through the right process.

spk_0 Construction managers hate this obviously, because they want to go through the right

spk_0 paper trail to make sure one, if there's a change on the building,

spk_0 that we go through the right process to make sure that one is constructible.

spk_0 Not going to change the fundamental design of the project.

spk_0 There's not going to be a risk around that.

spk_0 Two, that we get that change either through a change directive or a change order approved.

spk_0 So that the right people get paid.

spk_0 We want the owner to pay for the change that he's requesting.

spk_0 And so going through the right process to make sure that happens is important.

spk_0 That's outlined in the contract.

spk_0 And it tells you exactly that the process to go through to make sure one,

spk_0 the change gets approved.

spk_0 It's not going to affect the design.

spk_0 And the architects can approve that change.

spk_0 But two, that the right people are going to get compensated downstream for that change.

spk_0 The last thing you want to happen is that the subcontactor doesn't get paid or the construction

spk_0 manager doesn't get paid because they didn't go through the right process.

spk_0 So that in itself, understanding those rules of engagement creates a lot of efficiency.

spk_0 There's terms and processes around communication.

spk_0 There's terms and process around dispute resolution because

spk_0 no project goes on without having some level of conflict on the job site.

spk_0 Something's going to happen.

spk_0 And somebody's not going to be exactly sure how it works or does it line up with a contract.

spk_0 So it's lined out in the contract how to go through that process.

spk_0 It also talks to us about how do we collaborate with each other in the project?

spk_0 How do we work through that whole process?

spk_0 I talked earlier about families of documents.

spk_0 In outlines, usually in the A201, which is the general condition documents,

spk_0 what are the coordinating documents that you need to use?

spk_0 What pay app do you need to use?

spk_0 We've got a training class right now on construction payment process.

spk_0 Is this a cost plus job?

spk_0 Is this a stipulated sum?

spk_0 Is it a GMP?

spk_0 What kind of project is it?

spk_0 Because that's how you're going to have to build.

spk_0 All of that is laid out in a contract.

spk_0 And understanding those things helps you get paperwork submitted right the first time.

spk_0 It keeps cash flowing and it keeps the project flowing.

spk_0 Project efficiency is about staying on that timeline.

spk_0 That's scheduled to make sure that we're going to deliver the project

spk_0 per the owner's request in that timeline.

spk_0 If we get outside of these things, we break that timeline.

spk_0 And often we create rework if something's not done correctly,

spk_0 which is very inefficient on the job site.

spk_0 Well, we definitely want to continue this conversation,

spk_0 but we're going to take a quick break and hear from today's sponsor.

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spk_0 So can we talk a little bit more about that collaboration piece that you mentioned?

spk_0 I think the industry is starting to realize that collaboration improves the project efficiency,

spk_0 whether it's formal through new project delivery methods or just bringing all the parties together.

spk_0 So can you talk about how the contract documents, maybe the processes for that collaboration?

spk_0 And let's talk about it when we're in construction manager standpoint.

spk_0 Well-written contract, they established that process that allow for collaboration.

spk_0 We're going to talk about the C-132.

spk_0 It establishes the CM's responsibility to undertake that pre-construction phase,

spk_0 which includes the review and the evaluation of the owner's program to make sure that we

spk_0 understand the requirements of that project, that we arrive at that mutual understanding of those

spk_0 requirements for the owner and the architect. And if you do that up front, the way that those

spk_0 two parties work together and collaborate together are in line with that contract.

spk_0 There's, it outlines how we evaluate the program, the schedule, the budget requirements,

spk_0 the cost-ess of Nate, the preparation of the project schedule,

spk_0 and also how the review of those design documents happen to make sure, as we talked about early,

spk_0 that the project is constructable. You don't want something design later on down the road,

spk_0 we get to the job site and you just can't build it. And so that's outlined in the contract,

spk_0 and it actually helps to set up one for efficiency later. We can keep moving, but it's clear

spk_0 who's responsible for making sure that those things happen. There's similar requirements in the A-133,

spk_0 that's the agreement between the owner and the construction manager as a constructor.

spk_0 In both of those contracts, they're intended to detail the ways that collaboration should happen

spk_0 to create those project abilities. And you'll see the same thing in the construction manager as an

spk_0 advisor contract. It's laid out so that the two parties know how to work together.

spk_0 Can you share an example of a project we're using standardized contracts,

spk_0 clearly approve the efficiency or boarded a major issue on the project?

spk_0 I actually have an example, the opposite way, where a subcontractor didn't follow the contract,

spk_0 and didn't follow the process to get his chain-doordered approved. Did a lot of work that,

spk_0 to be honest, he didn't get paid fully for it. He got paid for a part of it because it was installed.

spk_0 But he didn't get paid for what he could have gotten paid for the process because he didn't follow

spk_0 the process that was laid out in A-201, which meant submitting it, getting the architect to review

spk_0 what the chain-doordered required. That process did not happen. And so he installed something that

spk_0 actually had to be modified later because there was an issue with the way that he put it in the building.

spk_0 And it required rework and it slowed down the schedule. How do you done it the way that he was

spk_0 supposed to do it in the beginning? The process would have happened. There wouldn't have been the

spk_0 slowdown between the general contractor and the sub. And to be honest, the frustration of the owner

spk_0 and the architect. So this is a really good segue into our next question, which is about disputes.

spk_0 You talked about the collaboration piece, but even when the parties agree to work collaboratively

spk_0 on the projects and they follow clear lines of communications that are stated in the contract,

spk_0 we all know that sometimes disputes arise on the project. So how can the contract help address

spk_0 efficiency? How can that impact the arising disputes? Yeah, they happen.

spk_0 They do. And even in the most coordinated projects, a dispute is going to happen.

spk_0 Having that clear dispute resolution provision inside the contract gives certain

spk_0 teachers the parties that they actually know the process to resolve the issue.

spk_0 The A201 requires that most disputes be initially referred to the designated initial decision

spk_0 maker for review and initial resolution. There's a process if that doesn't resolve it,

spk_0 the disassified party can move from the dispute to mediation. And then if mediation doesn't work,

spk_0 they can move to litigation or arbitration or another method. The contracts actually

spk_0 lay that process out so that somebody doesn't immediately go to litigation, which was obviously

spk_0 create great harm to the project. But there's steps in there to resolve it without going that for

spk_0 under most circumstances, the parties have an obligation to continue to perform. I've seen subcontactors

spk_0 have a dispute and walk off the job site. Actually, the contract says you have to stay there and

spk_0 you have to continue to work. They have to stay there while that dispute is pending. For example,

spk_0 the A201 15.1 brick work provides that in most circumstances pending final resolution to acclaim,

spk_0 the contractor shall proceed diligently with performance with the contract and the owner shall

spk_0 continue to make payment in accordance with the decision timeline. So work can't stop. The owner has

spk_0 to continue to pay while things progress. You don't want a project to stop just because there's a

spk_0 dispute. If you don't read the contract, you don't know those steps and if you don't understand

spk_0 those steps, then you're slowing that project down. Again, it's about the communication, the

spk_0 coordination, and the continued movement of that project. They've got to know who that initial

spk_0 decision-maker is, knowing who to go to. The AIA contract documents allow the parties to control

spk_0 the tempo for how quickly they want to push claims and disputes to final and binding resolution.

spk_0 In some circumstances, it may make sense to wait and aggregate the claims for a wide-ranging

spk_0 deviation and or a binding dispute proceeding. In other circumstances, it may be necessary for one

spk_0 party or the other to quickly know and understand the binding out-home so that they can plan

spk_0 accordingly on a wide range of other issues such as financing, manpower allocation, other items.

spk_0 Contract terms that establish a clear process and timeline for that initial dispute resolution

spk_0 coupled with the requirement that the party's continued performance continue to that project

spk_0 efficiency. It's understanding how to behave. Again, those rules of engagement continuing to

spk_0 progress on the project and work through the dispute in the way that the contract lays it out.

spk_0 I want to change this direction because I think I heard you earlier mentioned about sustainability

spk_0 and I know I've talked about technology and construction as where contract documents can

spk_0 impact efficiency. Can you explain that a little bit and how sustainability and design and

spk_0 technology are being impacted by these contract documents? Yeah. We talked earlier about the

spk_0 BIM documents than the fact that we've had to update those more frequently. The project requirements

spk_0 and industry practices around sustainable design and construction have evolved rapidly just like

spk_0 BIM. Depending on the nature and the extent of the sustainable design and construction required

spk_0 on the project, each project participant may be required to undertake specific measures to achieve

spk_0 that sustainable objective. It's important in the contract for each participant to know and

spk_0 understand when they sign that contract, whether and to what extent a project will involve the

spk_0 sustainable goals and objectives. At the AI contract documents have fill points in the initial

spk_0 information sections of key agreements that identify the anticipated sustainable objective for

spk_0 that project. For example, in section 1.1.6 of the A133 and section 1.1.7 of the C132,

spk_0 if a sustainable objective is identified, the agreements also require the parties to complete

spk_0 and incorporate a sustainable projects exhibit to define the terms, conditions and services

spk_0 related to that sustainable objective. The parties are also required to include sustainable

spk_0 objective project exhibits into the agreements with consultants and subcontractors performing the

spk_0 work in a way associated with that sustainable objective. Again, it's that coordinated language

spk_0 between those documents and those parties to understand what's expected of each of them.

spk_0 The sustainable objective will, among other things, require the development of a sustainability plan,

spk_0 listing each action that must be taken or item that must be accomplished with the sustainable

spk_0 measures are to achieve that objective and assigning responsibility for those measures to one of

spk_0 the project participants. So everybody goes in knowing what do they have to do to meet that sustainable

spk_0 objective. Knowing from time to time, from the time of contracting the nature of the project's

spk_0 sustainable objective, if any and having coordinated contract terms, assigning responsibility for

spk_0 the measures, that must be taken over the course of that project to achieve those objectives.

spk_0 It's critical to understand and to ensure that people can remain efficient while doing their part

spk_0 of that project exhibition, knowing what's expected of them up front, how to measure success,

spk_0 and how will they report out on it. Okay, so I'm, unfortunately, we only have time for one more

spk_0 question. We're wondering if you could give advice to our listeners, what's your one piece of advice

spk_0 for project leaders who want to make the most of their contract documents? I've sat in the

spk_0 seats, I'm sitting at ACD now, but I've sat in the construction industry and there's roles.

spk_0 And I think one of the key things that I've learned over the 25 years is that using the same

spk_0 contract over and over again is not the right answer. You need to make sure that you have a

spk_0 contract that's been updated for what's going on in the market, what's going on in the court system,

spk_0 and that those things have been incorporated along with the changes in the industry.

spk_0 And I've been in the seat before where you have that relationship where I've worked with this

spk_0 general contractor for 10 years. We're doing the same project over and over. It's the same

spk_0 I've been caught in that situation where something went wrong, something went awry because I

spk_0 didn't take the time to review it or this happened earlier in my career. And I think now knowing

spk_0 what happens and what changes just take that time up front to make sure you have the best contract

spk_0 for that project and that relationship is worth the investment.

spk_0 The beauty is that AI contract documents offers you that standardized template.

spk_0 Through our guides, we offer you the opportunity to modify them based on your project requirements.

spk_0 And we've talked to you about the process that we go through to make sure it's up to date with

spk_0 the industry and it's up to date the case law. Also, even when you use one of our contracts,

spk_0 make sure you're reviewing it with your general counsel because there's always unique things that

spk_0 are going on with projects. It is a little bit of an investment on the front side,

spk_0 but it is set up to make sure that your project is going to run efficiently and that you're not

spk_0 going to be surprised at the end of the contract by an issue or a dispute. So the investment in having

spk_0 the right contracts that front is credible. Yeah, I think that's a great point. I think that also

spk_0 goes back to the point that you made earlier about no two projects being the same. Shana,

spk_0 thank you so much for joining the podcast today. It was a great conversation. I think our

spk_0 listeners will get a lot out of this and learning about more about the AA contract documents program.

spk_0 So for any listeners who are looking to learn more or if you have questions, you can email support

spk_0 at aiacontracts.com or visit shop.aiacontracts.com. You can also check out CMAA's contract administration

spk_0 guidelines in the CMAA bookstore at www.cmaanet.org. On upcoming episodes of the construction

spk_0 leaders podcast, we will be discussing Arcadeus' 15th annual construction disputes report,

spk_0 as well as a new course on resilience and design and construction developed by CMAA's very own

spk_0 sustainability subcommittee. Be sure to subscribe to the podcast so you don't miss these and other

spk_0 upcoming episodes. Also, don't forget to follow us on social media at CMAA underscore HQ.

spk_0 And we'd love it if you could leave us a review and share your thoughts on today's episode and

spk_0 future episodes. On behalf of CMAA, I'm Carly Trout with Nick Soto. Thanks for listening.

Avoiding Disputes and Driving Results with Better Contracts

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