← Construction Leaders Podcast
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- [00:03]
A
Welcome to the Construction Leaders Podcast, where we explore ideas, strategies, and conversations that are shaping the future of the built environment. I'm your host here today, Nick Soto with Carly Trout. And whether you're driving to a job site, reviewing plans in the office, or grabbing a quick cup of coffee between meetings, we're glad you're here with us. On today's episode, we're going to talk about a topic that sits at the heart of every construction project, contracts and more specifically, how standardized contracts can actually help improve efficiency, collaboration, and outcomes on the job site. It's something that every program, project owner, contractor and designer should care about, but not everyone fully understands. To help us unpack this, I'm thrilled to be joined by Shannon McElveen, an expert in this area with deep knowledge of the AIA Contract Documents program. Together, we're going to discuss this what standardized agreements are, how they work behind the scenes to keep projects on track, and how clear collaborative contract language can prevent disputes, clarify communication, and even support sustainability goals. So let's start off by learning a little bit about Shannon and her role and then we'll dive into the Contracts influence everything from communication processes to the use of technology and conflict resolution. Shannon, welcome to the podcast. Do you mind giving us a little bit about yourself?
- [01:31]
B
Thanks, Nick. So again, my name is Shannon McElbean. I currently serve as the Chief Operating Officer here at AIA Contract Documents. I've been with the organization for about five years. I was part of the team that actually carved this business out of the AIA back in 2020. I came to ACD with about 20 years of experience in the construction industry. On the finance side, I've sat in the controller role, in a CFO role in subcontractors and general contractors. And I've also led the construction management function inside of two general contractors. I'm a proud Clemson Tiger. I have an accounting degree from Clemson. I tell everybody about that. Kids go Tigers.
- [02:20]
A
ID won't hold it against you.
- [02:22]
B
That's fine. I've also worked in Fortune 100 companies. I spent about 12 years at Coca Cola in Atlanta and have worked for Fujifilms. In my experience in business, the contract management and finance functions both play critical roles in project execution. In my mind, understanding the contract helps you understand the rules of engagement, the requirements of the owner, and those key milestone and communication process that set up a project for successful completion. When a team truly understands those important concepts or doesn't understand those important concepts, you can either keep a project for risk or set one up to fail so I'm excited to talk to you today about the things inside of AIA contract documents that are established to help projects be successful.
- [03:12]
C
So we appreciate that background and you describing how you came to AIA Contract Documents Program. But can you describe your current role in the AIA Contract Documents program as well as tell us a little bit about the program as a whole?
- [03:26]
B
Absolutely. So in my role as Chief Operating Officer, I am responsible for two key operations in the business. One of them is the Content Team. That Content Team is currently made up of six attorneys who work directly with the AIA Documents Committee. Together we work to draft new content, update existing content to make sure that content incorporates current case law changes in the industry, things that the AAC market wants to make sure are incorporated into those documents. The Education Department is also underneath my leadership. Why this is important to the Content Team is making the industry aware of what documents are available, how those documents are coordinated in families to make sure that whether you're the owner, the contractor, the architect or consultant, or a subcontractor, that you have the right language to participate in that project. We provide education in terms of classes that you can take. Also thought leadership around how these contracts and forms are important to the industry and what it means to use that coordinated language. We also talk about how to mitigate risk from your perspective in that project. So those two key roles and departments are underneath my leadership. You asked me to explain about the program and I mentioned to you that we work hand in hand with the AIA Documents Committee. It's not just the Content Team or attorneys and the Documents Committee. We also work with industry liaisons. We'll talk about how in the last update of the Construction Management documents, we had people from CMAA act as liaisons, review and give comments back on documents. Because we want to make sure that the content that we deliver is actually meeting the individual needs in the organization. We use what we call a 10 year cycle. So from the time a document is published on our platform, with guides, commentaries, instructions, all of those things, it takes several years for those to get incorporated and actually execute executed on projects. So think of from going all the way from going from the design contract to substantial completion, when the contractor hands the project back to the owner, it could take 18 to 24 months for a project to be completed. Then you'll see those projects, if there are disputes, go through the court system and case law is established that can take two to three years for it to get from execution through the court system. So we want to make sure that there's enough time from the time the documents are originally written. So there's actually experience in the court system to go back and review and edit those documents to make any necessary changes that might come out of a dispute. Knowing that our documents are standardized templates, I mentioned to you earlier that we issue a guide. Not every project is the same. So our guides have language in them that say, based on these circumstances, you might want to change this clause to this. You might want to consider these modifications based on your project specifications. With all of that going through the court system, then we start the process again to go back to the documents committee, the content team and liaisons to talk about do those documents stand, do they stand as they are or do we need to make modifications to them? That's a year long process to go through those task groups to make those changes. Then there's a process to republish those update guides and instructions and get them back to the market. So it's a very involved process to get those updated and back to the market. Same process happens when we issue new content. We meet internally, we meet with a documents committee and we meet with liaisons in the industry to make sure we're capturing any of those new concepts that are out there. An example is volumetric modular that we just issued this earlier this year.
- [07:35]
A
So I want to dig into how contracts can lead to project efficiency. But I do want to go back and ask you a question on this timeline. So it sounds like 10 years is necessary, but in the ever evolving built environment where things are changing rapidly, is it being looked at that 10 years may be too long for our standardized contract? When you think of 10 years ago, AI didn't exist, but 10 years before that, smartphones didn't exist. What's going to be around in 10 years? I have no idea.
- [08:05]
B
Let me give you an example of how we've experienced that, Nick. Specifically with the BIM documents and design build. Those two things have changed rapidly over the last 15 years. And so there's been iterations of the content much faster than the 10 year timeline. We've had multiple releases along the way. So standard content, if there's not rapid changes in the industry, you're going to see us pretty much stick to that 10 year timeline. But if there's things going on in the industry that are changing, you're going to see us adapt and release content at a much faster pace.
- [08:40]
A
That sounds more efficient. So let's take that and go into how contracts can lead to project efficiency.
- [08:46]
B
So if you think about contracts from the standpoint of and really establish the rules of engagement in a project. They talk about who's responsible for what timelines people are supposed to respond into and the order of operations in order to get things done. I told you I was a construction cfo, and one of my favorite things that would happen is somebody walks on the job site and says, hey, I really don't like where that door is. I want you to move it 100ft down the building. Can you do that today? And the superintendent obviously wants to do everything he can to please that owner. And so he acts without going through the right process. Construction managers hate this, obviously, because they want to go through the right paper trail to make sure one, if there's a change to the. If there's a change on the building that we go through the right process to make sure that one, it's constructible, it's not going to change the fundamental design of the project. There's not going to be a risk around that. Two, that we get that change either through a change directive or a change order approved so that the right people get paid. We want the owner to pay for the change that he's requesting. And so going through the right process to make sure that happens is important. That's outlined in the contract, and it tells you exactly that. The process to go through to make sure, one, the change gets approved, it's not going to affect the design and the architect's going to approve that change. But two, that the right people are going to get compensated downstream for that change. The last thing you want to happen is that the subcontractor doesn't get paid or the construction manager doesn't get paid because they didn't go through the right process. So that in itself, understanding those rules of engagement creates a lot of efficiency. There's terms and processes around communication, there's terms and process around dispute resolution, because no project goes on without having some level of conflict on the job site. Something's going to happen and somebody's not going to be exactly sure how it works or does it line up with a contract so it's lined out in the contract how to go through that process. It also talks to us about how do we collaborate with each other in the project, how do we work through that whole process. I talked earlier about families of documents in outlines, usually in the A201, which is the general condition documents. What are the coordinating documents that you need to use? What pay app do you need to use? We've got a training class right now on construction Payment process? Is this a cost plus job? Is this a stipulated sum? Is it a gmp? What kind of project is it? Because that's how you're going to have to bill. All of that is laid out in a contract. And understanding those things helps you get paperwork submitted right the first time. It keeps cash flowing and it keeps the project flowing. Project efficiency is about staying on that timeline, that schedule, to make sure that we're going to deliver the project per the owner's request in that timeline. If we get outside of these things, we break that timeline and often we create rework if something's not done correctly, which is very inefficient on the job site.
- [12:14]
C
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- [12:21]
D
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- [12:46]
C
So can we talk a little bit more about that collaboration piece that you mentioned? I think the industry is starting to realize that collaboration improves the project efficiency, whether it's formal, through new project delivery methods or just bringing all the parties together. So can you talk about how the contract documents, maybe the process is for that collaboration?
- [13:09]
B
Yep, let's talk about it from a construction manager standpoint. Well written contract, they establish that process that allow for collaboration. We're going to talk about the C132. It establishes the CM's responsibility to undertake that reconstruction phase, which includes the review and the evaluation of the owner's program to make sure that we understand the requirements of that project, that we arrive at that mutual understanding of those requirements for the owner and the architect. And if you do that up front, the way those two parties work together and collaborate together are in line with that contract. There's. It outlines how we evaluate the program, the schedule, the budget requirements, the cost estimate, the preparation of the project schedule, and also how the review of those design documents happen to make sure, as we talked about early, that the project is constructible. You don't want something designed later on down the road. We get to the job site and you just can't build it. And so that's outlined in the contract and it actually helps to set up one for efficiency later. We can keep moving, but it's clear who's responsible for making sure that those things happen. There's similar requirements in the A133, that's the agreement between the owner and the construction manager as a constructor. In both of those contracts, they're intended to detail the ways that collaboration should happen to create those project efficiencies. And you'll see the same thing in the construction manager as an advisor contract. It's laid out so that the two parties know how to work together.
- [14:56]
A
Can you share an example of a project where using standardized contracts clearly approved the efficiency or avoided a major issue on the project?
- [15:05]
B
I actually have an example the opposite way, where a subcontractor didn't follow the contract and didn't follow the process to get his change orders approved. Did a lot of work that to be honest, he didn't get paid fully for. He got paid for part of it because it was installed, but he didn't get paid for what. He could have gotten paid for the process because he didn't follow the process that was laid out in a 201, which meant submitting it, getting the architect to review what the change order required. That process did not happen. And so he installed something that actually had to be modified later because there was an issue with the way that he put it in the building and it required rework and it slowed down the schedule. Had he done it the way that he was supposed to do it in the beginning, the process would have happened. There wouldn't have been the slowdown between the general contractor and the sub, and to be honest, the frustration of the owner and the architect.
- [16:08]
C
So this is a really good segue into our next question, which is about disputes. You talked about the collaboration piece. But even when the parties agree to work collaboratively on the project and they follow clear lines of communications that are stated in the contract, we all know that sometimes disputes arise on the project. So how can the contract help address efficiency? How can that impact the arising disputes?
- [16:33]
B
Yeah, they happen. They do. And even in the most coordinated projects, a dispute is going to happen. Having that clear dispute resolution provision inside the contract gives certainty to the parties that they actually know the process to resolve the issue. The A201 requires that most disputes be initially referred to the designated initial decision maker for review and initial resolution. There's a process. If that doesn't resolve it, the dissatisfied party can move the dispute to mediation. And then if mediation doesn't work, they can move to litigation or arbitration or another method. The contracts actually lay that process out so that somebody doesn't immediately go to litigation, which was obviously create great harm to the project. But there's steps in there to resolve it without going that firm. Under most circumstances the parties have an obligation to to continue to perform. I've seen subcontractors have a dispute and walk off the job site. Actually the contract says you have to stay there and you have to continue to work. They have to stay there while that dispute is pending. For example, the A201 15 provides that in most circumstances, pending final resolution to a claim, the contractor shall proceed diligently with performance of the contract and the owner shall continue to make payment in accordance with the decision timeline. So work can't stop. The owner has to continue to pay while things progress. You don't want a project to stop just because there's a dispute. If you don't read the contract, you don't know those steps. And if you don't understand those steps, then you're slowing that project down. Again, it's about the communication, the coordination and the continued movement of that project. They've got to know who that that initial decision maker is knowing who to go to. The AIA contract documents allow the parties to control the tempo for how quickly they want to push claims and disputes to final and binding resolution. In some circumstances it may make sense to wait and aggregate the claims for a wide ranging mediation and or a binding dispute proceeding. In other circumstances it may be necessary for one party or the other to quickly know and understand the binding outcome so that they can plan accordingly on a wide range of other issues such as financing, manpower allocation, other items, contract terms that establish a clear process and timeline for that initial dispute resolution, coupled with the requirement that the parties continued performance continue to that project efficiency. So it's understanding how to behave again, those rules of engagement, continuing to progress on the project and work through the dispute and the way that the contract lays it out.
- [19:42]
A
I want to change this direction because I think I heard you earlier mention about sustainability and I know I've talked about technology and construction as where contract documents can impact efficiency. Can you explain that a little bit? And how sustainability and design and technology are being impacted by these contract documents?
- [20:03]
B
Yeah. We talked earlier about the BIM documents and the fact that we've had to update those more frequently. The project requirements and industry practices around sustainable design and construction have evolved rapidly just like them. Depending on the nature and the extent of the sustainable design and construction required on the project, each project participant may be required to undertake specific measures to achieve that sustainable objective. It's important in the contract for each participant to know and understand when they sign that contract, whether and to what extent a project will involve those sustainable goals and objectives. The AIA contract documents have fill points in the initial information sections of key agreements that identify the anticipated sustainable objective for that project. For example, in section 1.1.6 of the A133 and section 1.1.7 of the C132, if a sustainable objective is identified, the agreements also require the parties to complete and incorporate a sustainable projects exhibit to define the terms, conditions and services related to that sustainable objective. The parties are also required to include sustainable objective project exhibits into the agreements, with consultants and subcontractors performing the work in a way associated with that sustainable objective. Again, it's that coordinated language between those documents and those parties to understand what's expected of each of them. The sustainable objective will, among other things, require the development of a sustainability plan, listing each action that must be taken or item that must be accomplished, what the sustainable measures are to achieve that objective, and assigning responsibility for those measures to one of the project participants. So everybody goes in, knowing what do they have to do to meet that sustainable objective, knowing from time to time, from the time of contract and the nature of the project sustainable objective, if any, and having coordinated contract terms assigning responsibility for the measures that must be taken over the course of that project to achieve those objectives. It's critical to understand and to ensure that people can remain efficient while doing their part of that project execution, knowing what's expected of them up front, how to measure success, and how do they report out on it.
- [22:42]
C
Okay, so unfortunately we only have time for one more question. We're wondering if you could give advice to our listeners. What's your one piece of advice for project leaders who want to make the most of their contract documents?
- [22:56]
B
I've sat in the seats. I'm sitting at ACD now, but I've sat in the construction industry in those roles. And I think one of the key things that I've learned over the 25 years is that using the same contract over and over again is not the right answer. You need to make sure that you have a contract that's been updated for what's going on in the market, what's going on in the court system system, and that those things have been incorporated along with the changes in the industry. And I've been in the seat before where you have that relationship where I've worked with this general contractor for 10 years. We're doing the same project over and over. It's the same contract. I've been caught in that situation where something went wrong, something went awry because I didn't take the time to review it or this happened earlier in my career. And I think now, knowing what happens and what changes, just take that time up front to make sure you have the best contract for that project and that relationship is worth the investment. The beauty is that AIA Contract Documents offers you that standardized template. Through our guides, we offer you the opportunity to modify them based on your project requirements. And we've talked to you about the process that we go through to make sure it's up to date with the industry and it's up to date the case law. Also, even when you use one of our contracts, make sure you're reviewing it with your general counsel because there's always unique things that are going on with projects. It is a little bit of an investment on the front side, but it is set up to make sure that your project is going to run efficiently and that you're not going to be surprised at the end of the contract by an issue or a dispute. So the investment in having the right contracts up front is credible.
- [24:49]
C
Yeah, I think that's a great point. I think that also goes back to the point that you made earlier about no two projects being the same. Shannon, thank you so much for joining the podcast today. It was a great conversation. I think our listeners will get a lot out of this and learning about more about the AIA Contract Documents program. So for any listeners who are looking to learn more or if you have questions, you can email supportaiacontracts.com or visit shop.aiacontracts.com youm can also check out CMAA's contract administration guidelines in the CMAA Bookstore at www.cmaanet.org. on upcoming episodes of the Construction Leaders Podcast, we will be discussing Arcadis 15th annual construction disputes Report as well as a new course on resilience in Design and construction developed by CMAA's very own sustainability Subcommittee. Be sure to subscribe to the podcast so you don't miss these and other upcoming episodes. Also, don't forget to follow us on social media CMAAHQ and we'd love it if you could leave us a review and share your thoughts on today's episode and future episodes. On behalf of cmaa, I'm Carly Trout with Nick Soto. Thanks for listening.