Contract documents

July 7, 2023

The design and construction industries inherently carry some level of risk.  Good contract management and appropriate insurance are core risk management strategies that every contractor should practice.

In addition to these tools, there are other, complementary and cost-effective strategies that contractors can consider implementing.  And, as sustainability becomes a business baseline, driven by both market and regulatory factors, additional thought should be put to managing the risks of projects that target sustainable outcomes.

Clear Communication

Clear communication is one of the most cost-effective, yet overlooked risk management strategies.  A few aspects that contractors should consider:

• Maintain good communication with your insurance broker. As climate risk continues to impact every business, the insurance industry continues to evolve.  When starting a new project, connect with your broker, especially if you are working in a new geographic area, which may have varied climate, or other, risks.
• Distinguish goals or aspirations from contractual requirements. This is especially important in sustainable construction, because the language used to describe sustainability is often framed as optional.  However, sustainable outcomes are increasingly tied to regulatory requirements, and should be treated as such.
• Construction projects can evolve quickly, and there are, understandably, many conversations on site that relate to project work. Be sure to formalize jobsite communications to manage risk and ensure all parties are on the same page.  This can be as simple as a follow up email after a clarifying conversation on site; however, always make sure to follow any contractual obligations with respect to changes in the work.
• Ensure that responsibility for documentation is planned out and clearly communicated. This is a common pitfall, particularly in sustainability, and the evolving space of Environmental, Social and Governance (ESG), as both are increasingly data-driven, with heightened documentation requirements.

Research the Regulatory Landscape

This risk management strategy involves both avoiding risks and capturing potential opportunities to add value to the project.  Particularly in the world of sustainability, regulatory requirements are rapidly changing, and they relate to a variety of aspects, ranging from waste disposal to on-site water management and use.

Smart contractors will want to ensure compliance with the latest, jurisdiction specific rules regarding their jobsite operations, while also making sure they capture any incentives or related opportunities that may be applicable to the work.

Utilize a more Integrated Process

Design and construction work is increasingly complicated and, in particular, sustainability requirements necessitate greater coordination among all project participants.  This necessitates a higher level of collaboration, earlier in the process. Planning for and utilizing a more integrated process can support early identification of potential issues opportunities, and help ensure all team members are on the same page.

Jobsite Wellness

An increasing number of contractors are expanding the scope of what has traditionally been viewed as “safety” to include proactive strategies related to health and wellness both at the corporate office and on the jobsite.  These strategies can range from monitoring air quality in trailers and upgrading filters, to supplying sunscreen and healthy snacks on site, to providing a broader scope of support services and benefits.  Many wellness strategies can be drawn from third-party certification programs with an occupant health focus, such as WELL and Fitwel.

Wellness also includes ensuring that the construction industry is a diverse, safe and inclusive place.  The Associated General Contractor’s Culture of Care program provides resources and support for contractors looking to create welcoming professional environments.

Utilize Diverse Subcontractors and Vendors

Diversity in the supply chain can help manage a variety of risks, while providing opportunities for diverse-owned firms and supporting ESG goals.  Even if not required by ownership, consider actively seeking out diverse-owned subcontractors and suppliers.  Many state and local agencies provide lists of diverse-owned firms, and diverse chambers of commerce can also be helpful resources.

Nicole DeNamur is an attorney and sustainability consultant, based in Seattle, WA.  Her company, Sustainable Strategies, helps clients identify and manage the risks of sustainable innovation so they can pursue robust sustainability goals.  She is also an award-winning contributing author and has developed and taught graduate-level courses at the University of Washington and Boston Architectural College.

To learn more about how AIA Contract Documents can help you with your business, visit https://aiacontracts.com/.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.