September 16, 2013
Why municipalities should use standard industry contracts
View from the Board | Jack Davidson
Contracts developed in house, framed by lawyers and without input from contractors, increase the incidence of claims and disputes, add to the cost of a construction project and above all, are a major risk.
In determining the amount of a bid, it is literally impossible for the contractor to take into account all of the varying risks and responsibilities involved in each custom made contract.
If, on the other hand, there is a standard contract such as Master Municipal Construction Documents (MMCD), which is the basic document for every job, the contractor is in a good position to understand his responsibilities and formulate his bid based on the actual risk.
MMCDs are an example of standard industry contracts and provide simplicity, quality, certainty and transparency for all involved in the process.
They are a complete system for procurement, contract administration and record updating.
Their dispute resolution mechanism avoids legal wrangles and they have been developed with input from both sides, so risk is fairly distributed.
Easily understood and widely recognized by owners and consultants, MMCDs are familiar to the contracting community in B.C.
“The documents are what we call a niche market document, specifically designed to create underground municipal infrastructure under B.C. law,” said Brian Weeks, director and chief instructor of the MMCD Association.
“They are tightly focused on an area, where municipalities spend a lot of money and there are a lot of risks (that are) unknown.”
He added, “The documents have been extremely successful and that the most quantifiable benefit that I can see is that in the 17 construction seasons, there has never been a dispute between owners and contractors that had to be settled in court.”
Formed in 1989, the B.C. Road Builders and Heavy Construction Association were one of the three founding members, along with the Consulting Engineers of B.C., and the Municipal Engineers Division of the Association of Professional Engineers and Geoscientists of B.C.
In 1995, the MMCD Association was created to promote the documents, keep them current, and train people in their use.
“Today about 90 local governments, most consulting firms in B.C. and some out of province users use MMCDs,” said Neil Nyberg, executive director of the association.
“Also, MMCDs are endorsed by the B.C. Ministry of Transportation and Infrastructure for unorganized territories.”
MMCDs continue to be reviewed and updated on a periodic basis by active volunteer committees to ensure they are kept up to date with changing laws, code requirements, construction innovations and procedures.
This includes new and expanded editions of the document, new publications, training for users and referees, and research into new aspects of construction contracts.
“Each version of the MMCD improves administration as well as tracking changes in technology,” said Nyberg.
“The current (2009) edition is the fifth edition since inception and since this edition, MMCDs have been available in electronic format for reference, and the next edition will be supported on smartphones.”
The association also supports these adoptions by providing a comprehensive panel of training courses which include Contract Administrator Courses, Contract Superintendent Courses (offering Gold Seal credit) and Inspection Courses.
Information about course schedules can be found on the MMCD Association website at www.mmcd.net.
If a Municipality wants to reduce the costs of construction projects, they must reduce contract language ambiguity, allocate risk to the party who can best manage it, and reduce the incidence of claims.
This can all be accomplished by using standard contract forms like those published by the MMCD.
Jack Davidson is the president of the B.C. Road Builders and Heavy Construction Association. He is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to email@example.com.
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