How can you avoid problems with standard form contracts in construction projects?

One of the biggest failings made by construction organisations is not understanding the terms to which they are signing up to. Blindly signing up to terms you don't understand is a recipe for disaster. Not only do you not know the liabilities that you are committing to, but you also, then, don't have the knowledge with which to manage those liabilities. The more onerous the contract provisions the greater the focus/more effective the procedures you need to manage them and protect yourself.

Being a cost professional in the construction industry, You should learn to set actual contract costs, contract duration, and payment terms. Ensure that the deadlines and payment terms stated in the contract are realistic and achievable. This will help avoid delays and disputes. All information in the document must be written in clear, precise language.

Some of the standard contracts are from the American Institute of Architects (AIA). Many have references to other standard documents that are not actually included as an attachment. If you don't understand what they say or are not familiar with that document, you may be in for a surprise when someone sues you. You must be familiar with the actual contracts and any other documents incorporated by reference! Do not blindly sign a document someone puts in front of you, no matter how much you want the project. Several times I have had to negotiate contracts not with a client but with his attorney. I think I did just fine because I was familiar with construction contracts and the terms we were discussing.

A contract is like a relationship - it needs effort and attention from both parties. Ultimately for it to succeed all parties need to agree on what is important for them, it should endure by mutual consent and lead to good outcomes.

This is huge. You can’t understand, either, until you read it. You need both. Even if you outsource contracts help, you need a solid grasp yourself to make business decisions related to your risks. And getting your project teams trained on how to read contracts so they know what they’re responsible for.

Particular client or project requirements can necessitate the alteration of standard form contracts to suit. However, over recent decades the wholesale amendment of standard form contracts has become a consistent feature of the UK construction industry. Sadly, most of these changes are not dictated by specific project requirements, but rather by a desire to re-balance the contracts in the client's favour and push risk down to construction companies. Defeating the whole object of the pan-industry bodies intended to provide 'balanced' contracts which served all parties. This trend has led to a culture of unreasonable risk shift which is ultimately destabilising and counter-productive to the whole industry.

Keep this simple. If this is a standard form that's been formed over Decades like AIA or CensuDocs, don't let lawyers hack it up... only make project specific changes.

Contracts must explain all clauses and have no gaps Or resort to FIDIC contracts to resolve disputes and solve problems resulting from loopholes

That is correct, that is why the most important thing is to know what the project is about and with that experience you will be able to interpret what is behind each contract, every contract shows one side of everything.

Firstly, you should have good communication with stakeholders to define the planning process in your project, and the way to run the project. You should well define type of contract, financial and technical terms and conditions. I have a situation in my project, as a main contractor engineer, I revised sub-contractor contract and I found the description of items are not well- defined or understood by the team, also type of quantity survey is critical to initiate monthly invoices without ambiguity with the financial department. For example, some items in my contract are lump-sum by system, while they are unit measured by meter or unit in the contract. To sum up, Communication, well-definition of terms, and negotiation to reach to result.

Training project teams on how to read and understand contracts is important to help with this process. They need to know how the owner/GC wants the project run and where they can go for themselves to get project information.

Communication is very vital in managing any form of contract. With proper communication any disagreement can be resolved and the contract amended to complaint's satisfaction. Project parties should seek good understanding of what the contract entails and ask for clarification on any unclear article.

As you're reviewing the contract make a list of high level accountability items and make sure your team is keeping track of them throughout the project.

An essential part of managing a contract effectively is constant communication with stakeholders. It is sometimes difficult to negotiate conflicts but keeping clients involved in solutions pays off in the long run.

Exactly, every contract must have a history of steps and supports that leads us to clarify many terms and obligations that allow us to reach both economic and construction agreements.

This is an important point. Once a construction contract has been signed that does not mean that it is necessarily cast in stone forever. Circumstances can change and events can happen which might make it reasonable for the parties to re-assess and re-evaluate their existing agreement. It is important to comply with your contractual obligations, but that does not mean they can never be changed. The option always exists for two contracting parties to amend their agreement, and that may well prove a more favourable option than the failure of the project or of one party, or a protracted dispute. People too often forget that compromise is always available!

It is normal to get errors or discrepancies because I have always said that those who prepare the contracts never have the same vision as the one who builds and that is where errors or discrepancies appear.

Reviewing contracts is an integral part of ensuring project success. Post-project evaluations are as vital as the initial agreement. Regularly revisiting the contract ensures alignment with the project's progress and outcomes. Open dialogue with all stakeholders aids in pinpointing discrepancies early, allowing for timely rectifications. It's essential to not just detect potential issues but to collaborate on solutions, ensuring all parties are in agreement. When changes arise, it's crucial to formalize them in the contract and secure mutual consent, maintaining clarity and trust. Periodic reviews safeguard against misunderstandings and foster an environment conducive to achieving the project's objectives seamlessly.

This harks back to my earlier point above. You have to know and understand the contract in order to be able to effectively manage it and protect yourself. Once you do, then it's imperative that you manage it effectively. It's no use crying over spilt milk later. Record what you need to record and take the actions you need to take. But, in doing so, you don't need to be combative or escalatory.

It is also true that there have always been disputes where some agreements are often reached and others are not... but they are part of the negotiation where both parties bid for their interests.

I've seen firsthand the importance of enforcing contracts. However, it's not just about strict adherence; it's about understanding and collaboration. Contracts, in essence, act as a roadmap for projects. When disputes arise, it's imperative to first refer to the contract's terms and seek amicable resolution methods. While protecting one's interests is paramount, so is maintaining long-term relationships. Resorting immediately to litigation can strain relationships and be costly. Instead, prioritizing dialogue and utilizing mechanisms like mediation can often lead to more favorable, relationship-preserving outcomes. Always approach disagreements with professionalism and a focus on mutual benefit.

The contracts are there to serve your business. If they are creating cumbersome compliance issues, CHANGE IT!! If people can’t understand them, CHANGE IT. If they spark tons of redlines due to unreasonable risk requirements, change it to more balanced terms from the start. If they don’t align with your business model anymore, CHANGE IT. Know what they say, know what your business needs, and conform them to those - not the other way around.

Contracts can serve as valuable learning tools. Every project provides insights into aspects that worked smoothly and areas needing refinement. After each project, I prioritize a thorough review of contractual outcomes, as this introspection paves the way for continuous improvement. Engaging in open dialogue with the other party, acknowledging their efforts, and discussing mutual learnings, fosters collaboration and trust. It's essential to take these gleaned insights and actively integrate them into future contracts. Regularly updating standard contracts ensures they remain relevant, effective, and foster successful project outcomes.

Consider grading your contracts so you can make informed decisions on historical data. Don’t use contracts with completely unbalanced risk provisions to redline new contracts. Don’t auto renew MSAs with unbalanced terms without considering moving the needle.

Contractors who are focused on delivery and actually trying to achieve the contract requirements will always be more successful than those simply looking for excuses and reasons not to.

As a contractor, try to be a solutions provider on top of being a good service provider. Clients will remember you for being able to provide insights and solutions rather than merely complying to contracts obligations. In some companies, Clients do incentivize that kind of initiative.

When a region or a country is facing a slow-down in the construction sector, it is very important to spot the bidders who are trying to score a contract out of desperation. They can agree to all the terms of the contract while lacking the actual capability to abide by it, and their purpose will be just to keep afloat for as long as possible. A thorough review of the bidders - even well-known and big names - is very important before officially awarding the contract.

No matter how simple or complex the project - the outputs are delivered by or through working with other humans. Consider the human impact of your decisions and how making thoughtful decisions will enable project-success (however this is measured) and people to return to their family/home-life safe.