Masonry Magazine April 1998 Page. 36
ASA Blasts Plan to Publish
Subcontract with 'Pay-if-paid' Clause
The American Subcontractors Association Inc. (ASA) told the leaders of the Associated General Contractors of America (AGC) that their "actions speak louder than their words."
The Feb. 5 letter from ASA President Daniel Biedenbender and First Vice President Maynard Hulm was sent to AGC's two senior elected officials in response to an announcement by AGC that it has withdrawn its endorsement of the "Standard Form Construction Subcontract." AGC also announced that it is unilaterally publishing a new subcontract that includes a "pay-if-paid" clause. A "pay-if-paid" clause shifts the financial risk of a financially suspect owner from the general contractor to its subcontractors.
Biedenbender and Hulm responded, "It seems such a waste of the valuable and limited resources of the respective associations for just one to unilaterally scrap the work product of thousands of volunteer hours and hundreds of thousands of dollars." Biedenbender is vice president of Atlas Iron & Wire Works Inc., Milwaukee, Wis. Hulm is president of Hulm Construction Co., Parker, Colo.
"For several years, AGC and its leaders have stressed the need for 'partnering,' cooperation and teamwork on the construction jobsite and within the construction industry as a whole," Biedenbender and Hulm said. "Yet, in recent months, AGC's actions seem to have belied its words (e.g., refusal to sign a partnering charter developed by representatives of ASA, ASC and AGC; unilateral development and publication of bid day guidelines; and the jettisoning of the tripartite subcontract). The bottom line, gentlemen, is that your actions speak louder than your words."
A task force representing ASA, AGC and the Associated Specialty Contractors (ASC) released the standard subcontract form in 1994 after more than two years' work. The negotiations aimed at designing a form that would simplify contractual relationships between general contractors and subcontractors. In January, AGC announced its intention to "remove from the market" the standard subcontract, and urged ASA and ASC to do the same.
AGC cited changes that may be necessary to bring the standard subcontract "into conformance with the new AIA A-201 Document" as the reason for withdrawing its endorsement. A revised edition of the American Institute of Architects (AIA) A201 document, "General Conditions of the Contract for Construction," was released this past fall, updating the 1987 edition.
While ASA agrees with AGC that the language of the revised edition of the AIA A201 document necessitates some changes in the standard subcontract, ASA instead suggests updating the subcontract form as part of a continued cooperative effort among ASA, ASC and AGC. ASA proposed that negotiating teams from the three associations work together to bring the standard subcontract form up-to-date this spring.
The potential for modification was foreseen during the original negotiations on the document. The instructions to the document make it clear that it is "generally compatible" with the 1987 edition of the AIA A201 and that modifications may be necessary "on projects governed by other general conditions."
"AGC's actions are clearly a response to ASA's successes in the courts and in the state legislatures," said ASA Executive Vice President E. Colette Nelson. AGC's announcements come after a number of important court cases and legislative successes by subcontractors in which pay-if paid clauses in construction subcontracts have been overruled.
On Dec. 7, 1995, the New York Court of Appeals issued an advisory decision declaring pay-if-paid clauses to be in violation of public policy. The Court of Appeals rendered its decision in the case of West-Fair Electric Contractors and L. J. Coppola Inc. vs. Aetna Casualty and Surety Company and Gilbane Building Co.-a case that sprang from a failed shopping mall project in White Plains, N.Y. Legal advisors for ASA and its New York City chapter, the Subcontractors Trade Association, submitted an amicus curiae brief in the case.
In a 1997 case, Capitol Steel Fabricators vs. Mega Construction, the 2nd District of the California Court of Appeals rejected a general contractor's argument that pay-if-paid clauses are enforceable for public works contracts. ASA filed an amicus curiae brief in the case. The decision made it clear that pay-if-paid clauses are unenforceable in private and public works contracts in California. Pay if-paid clauses had already been found void and unenforceable in Wm. R. Clarke vs. Safeco.
In addition, the legislatures of Wisconsin and North Carolina have passed laws making pay-if-paid clauses against public policy and thus unenforceable. The legislatures of Illinois, Maryland and Missouri have taken similar action.
Nelson said that ASA intends to step up its efforts to end the use of pay-if-paid clauses. "ASA will continue to endorse and sell the standard subcontract form," Nelson added.
Established in 1966, ASA is a non-profit, membership, trade association composed of both union and non-union subcontractors, and specialty trade contractors and suppliers in the construction industry. ASA serves more than 6,000 members through a nationwide network of state and local chapters. From its national headquarters in Alexandria, Va., ASA represents its members before Congress and before federal departments and regulatory agencies.