Reviewing Contract Provisions

Contract Provisions

It is tempting to grade the fairness of project contracts on a one-to-ten scale. There are numerous agencies in California that regularly issue unfair and unconscionable contracts. On the other hand, some publicly issued contracts are too lenient and sloppy. In one case, a public agency contract, written by their architects, contained seven different definitions of completion. They conflicted with each other and what are commonly accepted industry standards.

The presence of lengthy disclaimer statements, indemnities, or outrageous insurance provisions may be a tip-off towards the type of attitude and approach to contracts administration that the public agency intends for the project as well. Often, such clauses are met by a flurry of inquiries and comments during the bidding period, or a dearth of bids on the appointed day of bidding itself.

A solitary and stratospheric bid on a major civic project can be both an embarrassment and an economic hardship for a public agency.

It is critical for the parties to carefully review every unfamiliar style of contract (e.g. a highway contract that does not follow either Caltrans Standard Specifications or the Southern California Greenbook.) Parties are especially warned to beware of typewritten contracts that sound like they follow Standard AIA, Engineers Joint Contract Documents Committee (EJCDC) or Consensus Document forms, but are substantially re-written and may contain incredibly oppressive terms.

It is a better practice to use the industry printed forms (e.g. AIA) or for highway or bridge projects, the Caltrans/Greenbook documents, and issue a set of Special Provisions or Contract Addendum that tailor those documents to the specific project. It is much easier for the interested public entity participants and the contracting community to review specific additions, deletions, and modifications of those lengthy contract forms, rather than hunt through the haystack for the "Golden Screws." It should be obvious, but those standard national construction forms do not contain the required provisions for public works jobs in the State of California. So, those standard provisions should also be included as a matter of course, as set forth in Chapter 9.

The printed industry forms themselves should further be annotated and included in the bidding package to fully reflect and notify the parties of the additions, deletions, and modifications by way of editorial hash marks, carrots, and references to the Special Provisions and Addenda.