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Strategic Partnership Program

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Contract Changes

ASAToday 2015-04-23
Contract Changes and Claims: Conduit Clauses and Pass-Through Delay Claims
To the extent that a delay is caused by owner action or omission, prime contractors and subcontractors are usually entitled to adjustment. However, subcontract forms used by many prime contractors often include provisions which limit a subcontractor's entitlement to relief for delay to only that which can be recovered by the prime contractor on the subcontractor's behalf. This kind of pass-through-only subcontract provision can be very limiting to a subcontractor's entitlement to relief. For example:
• If the prime contractor or one of its other subcontractors caused or contributed to the problems causing delay, the prime contractor may not be entitled to compensation or even an extension of time. In such a case, the effect of such a clause can be worse than a no damage for delay clause because it may also deprive the subcontractor of an extension of time.
• Entitlement to relief at the prime contract level is usually dependent upon showing that the delay actually impacted the project's critical path activities, thereby actually causing a delay in overall project completion. However, the timing or duration of a particular subcontractor's work may not be tied into activities on the critical path. Very significant delays can impede a subcontractor's performance. They may not, however, actually impact the overall project critical path. Since such delays would not entitle relief at the prime contract level, the pass-through-only subcontract clause would bar relief to the affected subcontractor as well.
• Any prime contract limitation on the nature or extent of relief for delay, or its procedure for claiming entitlement, will also bind the subcontractor.
When faced with such a clause, a subcontractor should be careful in structuring and characterizing its claim of entitlement. This is especially true when the prime contractor's actions or omissions are a suspected cause of delay. ASA's Contract Changes and Claims is a series of articles providing tips for the management of changes and changed conditions and how to realize full adjustment to the contract price or contract time.

New SBA Rule Bans Contract Clause

Prohibiting Sub Contact with Contracting Officer

Effective immediately, prime contractors on federal construction may not prohibit their subcontractors from asking the federal contracting officer about the status of payment. The prohibition was included in a new rule governing small business contracting, which was issued by the U.S. Small Business Administration on July 15. This ASA-supported rule complements laws that ASA successfully had enacted in the 1990s that explicitly permit a subcontractor to contact a contracting officer to obtain information on payment and to obtain a copy of the general contractor’s payment bond. In response, some general contractors added a clause to their subcontracts prohibiting such subcontractor contact. “Generally, communications between the subcontractor and the project’s owner should go through the GC,” said ASA Chief Advocacy Officer E. Colette Nelson. “But when subcontractor payment is dependent on the actions of the owner, even a public owner, then the subcontractor should be able to get payment information directly from the owner or the owner’s agent.” The new SBA rule, which took effect on Aug. 15, states: “…A prime contractor selected for award of a contract or contract modification that exceeds … $1,500,000 in the case of construction of a public facility, is responsible for the following: The Contractor may not prohibit a subcontractor from discussing any material matter pertaining to payment or utilization with the contracting officer …” ASA will work with SBA and the contracting agencies to incorporate this new prohibition into the Federal Acquisition Regulation (FAR).

News Release

ASA Logo
American Subcontractors Association, Inc.
1004 Duke St., Alexandria, VA 22314-3588 • www.asaonline.com • (703) 836-3482 fax

FOR RELEASE September 15, 2014
Contact: Marc Ramsey, (703) 684-3450, Ext. 1321, This email address is being protected from spambots. You need JavaScript enabled to view it.

ASA and FASA Offer Dozens of Resources and Tools to Meet Subcontractors’ Business Management Needs

ALEXANDRIA, Va. — The American Subcontractors Association and the Foundation of ASA are providing construction subcontractors with the latest strategies and ideas to manage their businesses with videos-on-demand, webinars, and other resources on such topics as retainage, pay-if-paid clauses, collection strategies and navigating contract revisions.

The Fall 2014 Edition of the ASA/FASA Construction Subcontractor’s Education Catalog showcases the newest education programs (live and recorded), books, and downloadable manuals that ASA and FASA offer to help subcontractors meet the demands of working in today’s construction industry.

ASA and FASA have developed dozens of education programs and products for subcontractors, including these new videos-on-demand:

  • “Liens and Bonds: Keeping Up with the Changes to Protect Your Rights to Collect Your Money” (Item #8063)
  • “Collection Strategies for Subcontractors” (Item #8064)
  • “All Work and No Pay Making You Crazy? Best Practices for Suspending Work Without Getting Fired” (Item #8065)
  • “Business Succession and Transfer Planning” (Item #8066)
  • “Prequalification Management” (Item #8067)
  • “Preparing for a Changing Workforce” (Item #8068)
  • “Strategic Planning — Looking Forward from the Downturn” (Item #8069)
  • “Navigating Contract Revisions” (Item #8070)
  • “How to Choose the Right Customers (and Get Them to Select Your Bid” (Item #8071)
  • “How to Bid More Competitively on Government Construction” (Item #8072)

In 2014-15, ASA and FASA will offer a series of eight live webinar programs:

  • Oct. 14 — “The Value of Technology and Data Management for Construction”
  • Nov. 18 — “Common Practices and Effectiveness of Incentive Compensation”
  • Dec. 9 — “Where Are We Now? 2014 Election Results and Outlook for 2015 Legislative Sessions”
  • Jan. 13 — “Negotiating Retainage”
  • Feb. 10 — “Mechanic’s Liens: Protect and Collect”
  • April 14 — “Non-Negotiators’ Strategies for Negotiating Outstanding Results”
  • May 12 — “Managing the Life Blood of Contracting — Cash Flow”
  • June 9 — “Bidding from the Other Side: How GCs Use GradeBeam to Find Subcontractors”

Each ASA webinar will take place from 12:00 p.m. to 1:30 p.m. Eastern time on the second Tuesday of the month, with the exception of the November 2014 webinar, which is scheduled for the Tuesday after the Veterans Day holiday. The registration fee for each webinar is $99 for members and $179 for nonmembers and allows access with one Internet connection.

The ASA/FASA education catalog also highlights the ConsensusDocs 700 Series of contract documents for subcontractors. ASA is a founding member of the ConsensusDocs coalition, which publishes a library of 100-plus contracts and documents that incorporate best practices and fairly allocate risk to help reduce costly contingencies and adversarial negotiations. ASA members can use the promotional code ASA100 to receive a special member discount off these ASA-endorsed documents when ordering online via the ConsensusDocs Web site.

Beware of Project Schedules

Beware of Project Schedule Provisions 


Are general contractors requiring your subcontracting firm to “be flexible and adjust your schedule as necessary” without appropriate time extensions or compensation? Earlier-than-planned subcontractor start and completion dates, for example, can result in an unrealistically short installation period if sufficient labor and material cannot be made available that soon, while later start and completion dates than expected can result in higher wage and material costs. Furthermore, when subcontract work is accelerated to meet the unchanged completion date, extra costs usually occur due to overtime, out-of-sequence work, and other inefficiencies. ASA’s newest “Subcontractor’s Negotiating Tip Sheet” on the “Project Schedule” suggests that subcontractors could respond to such an argument by a GC by saying, “I understand that you may have to make subcontract schedule changes, but I can’t agree in advance to adapt and adjust my work to suit your needs without the right to more money and an extension of time for me to finish my work.” General contractor proprietary contracts sometimes include a project schedule provision, such as: “The Subcontractor shall commence its work when directed by the Contract, and the Subcontractor shall achieve final completion not later than [date certain], it being agreed that time is of the essence in this subcontract. The Subcontractor recognizes the Contractor’s exclusive right to modify the schedule or sequence of work from time to time without extension of time or additional compensation.” ASA recommends, instead, that subcontractors replace such a provision with:

“Subcontractor shall be entitled to equitable adjustment of the contract price, including but not limited to any increased costs of labor, supervision, equipment or materials, and reasonable overhead and profit, for any modification of the project schedule differing from the bid schedule, and for any other delays, acceleration, out-of-sequence work and schedule changes beyond the Subcontractor’s reasonable control, including but not limited to those caused by labor unrest, fires, floods, acts of nature or government, wars, embargos, vendor priorities and allocations, transportation delays, suspension of work for non-payment or as ordered by Customer, or other delays caused by Customer or others.”

The general contractor might insist on using its provision: “We don’t pay for acceleration. You just have to be flexible.” A subcontractor could respond, “If my work doesn’t start on time because of project delays, I’ll need to be paid for my acceleration costs or be allowed more time to finish.” If the GC argues, “There’s never an excuse for not getting the job done on time,” the subcontractor could counter: “We agree to make a good-faith effort to help you meet your completion date, but we can’t give up any delay claim rights if we incur more cost for reasons outside of our control.” The ASA tip sheets are released weekly and are designed to provide the subcontractor with the information it needs to negotiate a particular subcontract clause, including ASA-recommended language, samples of what a subcontractor may see in a client’s proprietary subcontract, an explanation of the impact of poor language on a subcontractor, negotiating tips, and sources for more information. The ASA tip sheets are available in the members-only section of the ASA Web site.