Contract Language Doesn't Always Reflect Changes in Technology
by David Mendes

Suppose a construction subcontractor submitted a computer file with a shop drawing for extra work for an architect's approval and later received confirmation that the drawing was approved. The subcontractor would proceed with its work and be assured that the design was correct, right? Probably, but not necessarily. Suppose that, unbeknownst to the subcontractor, the file with the shop drawing did not appear exactly the same to the architect when he or she opened it and the approval was based on a flawed design. Depending on what the subcontractor's subcontract agreement says - or doesn't say - the subcontractor could be on the hook for some expensive liabilities.

This example illustrates the point made in the American Subcontractors Association's (ASA) latest white paper, titled "Electronic Data Exchange in Construction." As technology has changed, sometimes contracts have not kept up. The resulting gap has left subcontractors vulnerable to a new class of risks. Sometimes, the new risks of technology are shifted not by accident, but intentionally. ASA's white paper puts it this way: "While commentators admonish the construction industry for failing to take advantage of innovations to improve productivity, construction contract provisions are sometimes written to the disadvantage of contractors and subcontractors that employ productivity-enhancing information management technologies."

The white paper provides an example of existing contract language that doesn't just fail to address changes from paper-based communication by fax or mail, but actively disfavors newer technologies. The "Standard General Conditions of the Construction Contract" published by the Engineers Joint Contract Documents Committee, EJCDC C-700 (2002), states:

"Copies of data furnished by Owner or Engineer to Contractor or Contractor to Owner or Engineer that may be relied upon are limited to the printed copies (also known as hard copies). Files in electronic media format of text, data, graphics, or other types are furnished only for the convenience of the receiving party. Any conclusion or information obtained or derived from such electronic files will be at the user's sole risk. If there is a discrepancy between the electronic files and the hard copies, the hard copies govern."

Clearly, such language leaves a contractor that has come to rely on contemporary technology for requests for information, change orders, schedule changes, work orders, etc., at greater risk than its "old-fashioned" competition.

To help subcontractors and other constructors identify possible areas of concern and develop plans to address them, ASA, the Associated General Contractors of America, and the Associated Specialty Contractors published a "Guideline on Exchanging Documents and Data in Electronic Form." The guideline is available online at www.constructionguidelines.org. It includes pointers on receipt and storage of electronic documents, privacy and security requirements, and even what kind of agreement is needed to apportion risks between two parties that are communicating electronically.

Learn more about the exchange of electronic data and how it can impact your construction firm. Visit ASA's Web site at www.asaonline.com and click on "Stand Up! for Subcontractors," or call ASA at (703) 684-3450.

Contact: David Mendes
(703) 684-3450, Ext. 1335
dmendes@asa-hq.com