AGC of America Filed the Following Additional Comments in the AGC Monday Morning Quarterback:

ConsensusDOCS and AGC Contracts Treatment of Contingent Payment
With the Friday, September 28th release ConsensusDOCS contract documents, there are several significant changes from the previous AGC contract documents. The AGC Contract Documents Committee has developed specific commentary for Contractors, which you can download from the national website.

One issue of particular importance for AGC is contingent payment. The previous AGC 650 Subcontract Agreement (1998 edition) which is now defunct, included a pay-when-paid provision as does the new ConsensusDOCS 750 Subcontract. Section 8.2.5 contains a contingent payment provision to the Subcontractor such that payment is due from the Contractor to the Subcontractor within 7 days of Owner’s payment to Contractor. This mirrors common law for the majority of states in that it provides for payment to the Subcontractor within a reasonable time if, through no fault of the Subcontractor, the Owner fails to timely pay the Contractor.

Some AGC members believe that a “pay-if-paid” clause equitably shares the risk of Owner non-payment. Because a consensus could not be reached by the ConsensusDOCS drafting organizations for including a pay-if-paid provision, AGC continues to offer publication of the AGC 655 Subcontract (1998 edition) that contains a pay-if-paid clause. The AGC 655 is one of approximately 20 paper contracts that will continue to be published after the release of ConsensusDOCS. In addition, the ConsensusDOCS 750 can be modified to incorporate a pay-if-paid clause by adding the following to the beginning of section 8.2.5. Receipt of payment by the Contractor from the Owner for the Subcontract Work is a condition precedent to payment by the Contractor to the Subcontractor. The Subcontractor hereby acknowledges that it relies on the credit of the Owner, not the Contractor for payment of Subcontract Work. Contractors should check applicable law carefully before modifying this section as a “pay if paid” clause shifting risk of receiving payment to the Subcontractor may not be fully enforceable. A guidebook that includes all the sponsors commentary is under development and will be published shortly. When completed we will provide you a link to this useful guidebook.

If you have any further questions you may contact Brian Perlberg.

Posted October 3, 2007

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