Part 2 - Savvy Subs Pump Up Proposals

We received a lot of positive feedback on our last article on three terms all savvy subs should include in their Proposals, so we’re back to share a few more! 

Proposals are the first chance a Subcontractor gets to address anticipated bad Subcontract terms. If you have terms and conditions included with your Proposal, then you can easily explain that your pricing expected these terms to be included in the Subcontract. 

Please keep in mind that if you sign a Subcontract that does not refer to and include your Proposal then it’s as if your Proposal didn’t exist. 

BEWARE: If you can get your proposal referenced and attached to the Subcontract, many Subcontracts state that if your Proposal is attached, then it is for the scope of work only and that any terms included in your Proposal are of no effect. 

So, what other types of terms should you include in your Proposal? As we said in our previous article, there are lots of them but, for now, let’s look at three more important ones that you should seriously consider when creating the terms for your Proposals: 

1.        Include Force Majeure terms to clearly state that you will not be liable for impacts to increases in your cost and time by events that are not within your control. 

2.        Address project schedules so you don’t get stuck with a schedule that you can’t meet. 

3.        Limit the extent of your obligation to review plans and specifications and do site investigations to avoid taking on the risk of bad or inconsistent plans and unknown site conditions.  

1.    Include Force Majeure Terms 

Force Majeure provisions are very important these days, especially with what we all experienced with supply chain issues during the 2020 pandemic and concerns about tariffs.  While many subcontracts have provisions that allow some relief to Subcontractor due to force majeure events, it usually is in the form of delays and not increases in the cost to acquire the materials. 

Many force majeure clauses also include language that the event must be “unexpected” or “unforeseen” in order to qualify under force majeure.  But, with the wild ride this industry has experienced over the last few years, one could argue that there are very few things that are “unforeseen” or “unexpected.” 

It’s best to include with your Proposal terms what you’d like to see for a force majeure provision. One example is as follows: 

Subcontractor shall not be liable for any failure or delay in performing its Work due to any causes to the extent beyond Subcontractor’s reasonable control (“Force Majeure Event”), including, but not limited to, acts of God, accidents, riots, war, terrorist acts, epidemics or pandemics or reactions and rules in response thereto, quarantines, civil commotion, breakdown or interruption of communication, utility, or internet services, natural catastrophes, governmental acts or omissions, changes in laws or regulations, tariffs, changes in taxes, strikes, fire, explosion, supply chain interruptions, or lack of reasonable availability of materials or labor. Subcontractor shall be equitably compensated for increases in its cost to acquire materials to the extent caused by a Force Majeure Event. 

2.      Address the Project Schedule. 

A project schedule is almost always referenced in the Subcontract and included as a Contract Document. But, many times you may not have seen the base-line schedule because it is not yet finalized when you submit your Proposal or are asked to sign your Subcontract. What do you do?  You need to confirm it is accurate for your work when the Subcontract is signed, or address concerns before the Subcontract is signed.  Knowing this may be difficult , but it’s good practice to address the project schedule in your Proposal.

You also want to be clear if your work includes equipment with long lead time items. One way to address this in your Proposal is to add a list of equipment that has long lead times and include the lead time after submittals are approved the equipment can be released for manufacturing.  

Consider including a provision in your Proposal terms like the following: 

Subcontractor will comply with the agreed-to schedule.  Subcontractor’s compensation shall be increased to the extent Subcontractor’s cost of work increases due to the project site not being ready for Subcontractor’s work per the agreed-to schedule or Contractor’s changes in the agreed-to schedule, including, but not limited to, increases caused by Subcontractor having to accelerate its work, work its crew beyond its normal work day or week, re-sequencing its work, providing extra mobilizations, and/or incurring extra rental equipment costs. 

3.    Avoid Responsibility for Deficient Contract Documents and Unknown Site Conditions  

Your Subcontract almost always includes the obligation for you to review the Contract Documents and familiarize yourself with the jobsite conditions. You do not want to be responsible for confirming that all the plans and specifications coordinate properly, unless you are part of a design-build team, which we won’t address here.  

You don’t want to be tasked with doing anything more than a visual site visit, because it is a rare situation when you do any destructive investigation into existing conditions.  

You can also expect to see a provision in your Subcontract that commits you to following all the rules, laws, statutes, ordinances, codes, and regulations related to your work. 

One way to combat this in your Proposal is to include language like the following: 

Subcontractor’s site investigation (which shall be visual only) and examination of Contract Documents are in its capacity as a subcontractor and not a design professional and are for the purpose of facilitating coordination of Subcontractor's work and not for the purpose of discovering errors, omissions, or inconsistencies in the plans and specifications, or non-compliance of such with laws, rules, ordinances, codes, or regulations, or discovering latent, subsurface, or any site conditions that are not readily observable, none of which Subcontractor shall be held liable, and, Subcontractor shall be equitably compensated in the event any such errors, omissions, inconsistencies, non-compliances, or such site conditions cause an increase in Subcontractor’s cost or time in performance of its work. Subcontractor shall not be responsible for its Work failing to comply with rules, laws, statutes, ordinances, codes, or regulations in the event the drawings/plans and/or specifications provided with the Contract Documents fail to so comply. 

Remember, the main reason you want to add terms and conditions to your Proposal is to have a much stronger leg to stand on when you are negotiating the Subcontract. By thinking through terms that are important to have in your Subcontract, and including those terms in your Proposal, you can legitimately argue that your pricing was based on having these or similar terms in the Subcontract. And, most importantly, don’t forget to include the terms you want in the Subcontract! Good Luck!