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good afternoon welcome to the what contractors need to know master agreements and work orders this is a webinar brought to you by contract documents before we get started a few administrative items this presentation is protected by u.s and international copyright laws so reproduction and distribution and use of this presentation without written permission of the speaker is prohibited a disclaimer as well this webinar and any information contained in this presentation is not provided as legal advice we do advise that you always um confer with your own legal counsel so with that i'm going to turn it over to our presenter donovan olive to introduce himself donovan well thank you hospi and good afternoon everyone thanks for joining our presentation uh my name is donovan olive i'm assistant general counsel of hok i've been with hok for over 13 years and before that i was a private practice construction lawyer for about five years and an architect for about eight years before that i've had the privilege of serving on the contract documents committee since 2016 so all of this to say that design and construction have been my career and i hope that experience adds some texture to the presentation today so over to jimmy thanks donovan uh so as donovan said my name is jimmy germano i'm a manager in council currently with the before i came to the i was also in private practice as a construction attorney in the dc area and sort of a general civil litigation attorney as well for about seven years but again mostly focused on construction and that experience was really helpful in in so far as it gave me a lot of experience in private practice in negotiating contracts so at the start of projects while projects were ongoing negotiating claims and writing claims responding to claims and then also post construction doing claims analysis management and then litigation uh etc so um with that a little background about us we'll get right into the learning objectives for today and what we hope to convey to you over the next maybe 50 or 55 minutes so today's learning objectives are four folds the first thing that we want to do is help you to understand the contractual model so you signed up for this webinar you at least express a little bit of interest in the master agreement work order framework so we're going to help you understand how that sort of exists as a contractual model the second thing that we hope to do is make you familiar with some of the terms and the conditions in the master agreement and the work order set so obviously an hour just of course isn't enough time to go into everything but we're going to touch on a few of the highlights with respect to those terms and conditions so you at least have a big picture idea of what you're looking at with these um these couple documents so the third uh is we're going to get into like i said we're going to get into the terms of the the a121 2018 and that's the number for the master agreement and then it's the a221 which is the work order we're also going to talk about the a421 which is the sort of the subcontractor version of the work order and then the 422 would be the subcontractor work order so we'll we'll tie in those documents together and explain a little bit as to how the subcontractor versions of those documents play in to the whole contractual model and the framework and how they fit together and then lastly we'll show you that if you have any additional questions where you can get those additional resources that include tools guides contact information anything else that might assist you in understanding some of the contract and risk management issues that go along with the master agreement framework so with that just a brief overview and i'm sure most of you are aware but we'll just touch on this for maybe two or three minutes the contract documents program at the has a long history it's been around since about 1888 so 132 years or so the reason that the created standard a standard contract and that is actually the a copy of the first standard contract that you're seeing on your screen on the right at the 1888 version and that was an owner contractor agreement the reason why it was created and the reason why the contract documents program exists is to make design and construction transactions a little bit more predictable and that actually plays very nicely into what we're going to be talking about today which is master agreements which enhances and increases your predictability across projects particularly when you're dealing with a single client the number of documents that the ai has right now is right around 200 and that includes all the agreements and forms amendments exhibits etc what makes the documents the industry standard besides their widespread use is the volume of case history and precedent that's incorporated into these documents so what you're going to notice as we go throughout the presentation today is you might be familiar with the a101 or a201 set that's that's one of our most commonly used owner contractor agreements or even if if you do smaller projects you might be more familiar with the a104 or 105 set you're going to see a lot of terms today that look very similar and clauses that are in the master agreements that look very similar to the clauses that you might be used to seeing and that's because that those clauses have a volume of case history and precedent that's incorporated into them so you may have a case law in your jurisdiction that interprets for example a clause in the a201 a certain way and that will give you a little bit more predictability with respect to using that same or very similar clause in the master agreement because the the goal of the is to create this uniformity and predictability across contract families and across documents um so the that sort of ties into the concept of the drafting process and it's important to understand that as we go forward here talking about the master agreement so the contract documents have an iterative drafting process and what that means is that the contracts are always seeking improvement so the master agreement set that we're going to look at today they all have dash 2018 at the end of them and i'm sure as most of you know that means they were published first in 2018. most of the documents are set to expire and then again they'll get updated on a 10-year cycle well within these 10 years the is receiving feedback on these documents feedback in the form of court decisions in the form of opinions from users in the form of straight feedback from users of the documents people who download them and then contact the and say hey you know i had this issue with this one clause you know i'm going to consider rewording it and that all goes into a you know a collective proverbial bin uh and at the in the lead up on that 10-year review all of those comments and all that information is reviewed to make these documents even better so it gives a decade worth of information that then the and its documents committee can go forward and really update these documents appropriately utilizing things such as market research like i said industry stakeholders that might give information about the documents and member resources and then right before the documents are published they are sent out to liaisons and subject matter experts so well-established lawyers in the industry construction managers owners architects developers insurance professionals who review the substance of the changes and really give a lot of of their expertise in saying you know this is a good change or this might not be a good change and here's what we think about it and it's through that process that the people on the documents committee like donovan then take all of that information and create these documents again updating them on the 10-year cycle so the and the contract documents program owes you know debt of gratitude to the members of the committee and also all of the um information that's received during that 10-year cycle and and very quickly just one more sentence on that and this is sort of just addressing it to all the attendees if you're using our documents feel free to reach out to us if you have a question about the content of the documents or you have a suggestion about the documents that all goes into this information that's used to update these whether it's these documents or others that you may be using so feel free always to reach out to us with that let's go to why you are here today so just an overview of where we're going to go um and an overview of sort of the substance of today's presentation so what you're going to learn is that the the substance of the master agreement it's similar to your typical contract and what i mean by that is we're going to use the a101a 201 contract set assuming that most of you are at least familiar with that those two agreements and what you're going to see is that the substance is going to be largely the same but the structure is different and those differences mostly lie in the sections that are related to insurance and bonds substantial and final completion your warranties and payment and all of that will become clear and you'll sort of see why those issues need to be structurally a little bit different in the master agreement set so let me show you what that set looks like this is probably something that you might be used to seeing so whether you're an owner or a contractor or a subcontractor you're probably used to this at least by now so in 2017 the a101 family was updated uh this is the you know the quote unquote conventional family so the a101 that's your standard form of agreement between owner and contractor where the basis is a stipulated sum and if if you're doing a cost plus either with or without a guaranteed maximum price you might be more used to seeing the a102 or the a103 respectively but we're just going to talk about the a101 today the a101 and the a101 insurance exhibit which is your exhibit a combined with your a201 general conditions that creates your contract so let's say you're on project number one for an owner this is going to be your contract if you're if you're a contractor then you have the same let's say the same owner wants you to engage in another project or maybe another phase on that project this is again what your second project is going to look like it's essentially identical your a101 combined with your insurance exhibit and your a201 and that creates your project so for a single project this may make sense it's it's a lot of pages i mean together this is um probably 60 or so pages worth of documents a lot of negotiation goes into it the negotiations can last months depending on how you know how involved they are how well you know your client etc but here's where the structural difference comes into the master agreement framework so this is your master agreement so on the right hand side you have your a121 2018 and that's your master agreement between owner and contractor where work is provided upon multiple work orders that's the long title and what we're going to call today is the master agreement or sometimes we might refer to it as an msa a master service agreement which is you know slang in the industry but usually refer to it as your master agreement 121. so what you do is you agree with a121 and that's your standard terms and conditions essentially you can sort of think of it conceptually as your a201 you're agreeing to your terms and conditions first and then with each project you then execute a work order your a221 so on project one you execute a work order and that work order incorporates by reference and includes the terms of your a121 master agreement and then you just do the same thing for project two again it ties to the same master agreement same thing for project 3 etc so you can see how maybe with your first project for this client or this owner or your first project with this contractor there may not be that much efficiency gained by using this set over your your typical a101a201 but as you get into the second third fourth fifth project you can see how you're really going to gain efficiency through the contract negotiation process so if you're a you know a nationwide bank or coffee chain or restaurant or whatever the case may be you can have one master agreement and then for each one of these you just execute your work order um you know start the contract and move forward and move on um and then there's others you know some terms obviously that come into play with how that works and that's exactly what we're going to get into next but that just gives you a little flavor an overview as to the master agreement framework and with that we're going to get into some of the terms in the master agreement and the work order and i'm going to hand the mic over to donovan to talk a little bit about what is exactly a master agreement okay well thanks jimmy um i think it's always good to start a discussion about master agreements by really maybe talking about some examples of when they would be used so in a general sense a master agreement is used by a single client that expects to do repetitive improvements capital improvements over a period of time so as jimmy mentioned it's an efficient process where the the owner can negotiate a standard set of terms and conditions with a contractor that will apply across multiple projects or may apply across multiple phases within a single project so for example where you have a single client and a single project um you might have a situation where the contractor is expected to build out um various portions of the of an office tower that is recently completed so the landlord might own or might hold a master agreement with the contractor and then issue work orders as various tenants are brought on board and and their spaces are built out another example might be where a owner has a single project such as a a patient tower a hospital has just built a patient tower and they might use a master agreement to build that out where they do it by phases so phase one is level six to ten the patient rooms phase two might be four to five where you have or and icu facilities and then phase three might be levels one two three emergency uh center and patient intake weighting and amenities so um it can be used in a in a variety of ways um but it also might be used and this is pretty common with national clients is that a master agreement is used where one client has multiple projects over multiple locations you might have a bank such as jpmorgan chase that has regional offices and branches that are either being newly constructed or renovated and it makes sense then to negotiate a master agreement and issue service orders or i'm sorry work orders for various uh branches and offices another master agreement that you might be familiar with are government idiq indefinite quantity indefinite delivery contracts those are also um a form of a master agreement where the government might say we'll we'll issue a up to 100 million in new construction work over a five-year period and then they have a contractor on a call on-call basis to provide the work as needed so the next slide shows generally how the master agreement is broken down um it's it's important to to keep in mind that the master agreement it comes in two parts the the actual agreement and then the work order the master agreement contains those terms that are fixed and invariable over the term of the relationship it's very important to get these terms right if there are bad terms in the master agreement they are repeated across multiple projects and so i know when we do master service agreements with hok we're very careful to make sure we have the right liability the right performance obligations we have them defined very carefully so that we're not potentially creating problems across multiple projects it's a balancing act what i've found is that it's what the preferred process is to have your scope of service or your scope of work your time for performance and what you're being paid for that work to really be determined in the work order and to leave you know the general terms and conditions in the master agreement but the economic terms have them in the work order so they can be negotiated on a project by project basis owners may want to fix certain terms in the master agreement maybe unit pricing maybe there's certain liability obligations or duties on the part of of the contractor that they want to have fixed across multiple projects and you know the it's always this kind of balancing act about what is fixed versus what remains flexible to be negotiated at a later date um one thing to keep in mind in the a121 the the general conditions are embodied in the master agreement so there's no separate document that incorporates general terms and conditions it does not incorporate the the a201 the general conditions in the a1 121 are very similar to the a104 so if you've worked in the a104 before you'll be familiar with those terms and conditions um so when you negotiate the a121 keep in mind you will be negotiating things such as warranty changes in the work time for performance including delay issues payment all of those all of those core general terms and conditions are are in the master agreement let's see on the next slide the the thing that is really distinguishable in master agreements of course are are the work orders and the work order is where the rubber meets the road it's where the execution of the work order is where the contractor is obligated to actually perform work so you negotiate the master agreement it goes and sits on the side until there's work to be done and once work has been identified then a work order is issued and in that work order you'll identify the scope the time for performance and the compensation so let's see in the next slide we're looking yeah looking at um generally what the uh what is covered in a work order uh i think it's important to understand there are some unique terms in the master agreement which i call the enabling language that allows work orders to be issued at a later date very it's an important terms to keep track of as you're negotiating the master agreement are 1.1 of the master agreement which says that the agreement will be effective from one year one year from the date written above so that means that those terms are in effect for one year and that the master agreement applies to all work orders issued by the parties within that term so it's very important to keep track of the term of your master agreement and make sure that you're that it's in effect when a work order is issued addresses that pretty effectively by providing in 1.3 and evergreen clause which allows for automatic renewal of the work order on an annual basis and that renewal is effective unless either party gets noticed 60 days prior to the renewal date so you want to make sure you're tracking that date closely in case you have terms in the master agreement that are not um are not working for you uh that you can get noticed and be able to at least have an opportunity to renegotiate those terms um the other clauses that are important and these are these are uh clauses that we look for in our master service agreements and that is that from an owner's perspective they are not required to issue any work order so it's quite possible you could negotiate a master agreement and there's no work that's ever ordered under it under it that's very rare but it certainly is a possibility the other thing for contractors that is important is that the contractor may also decline to accept any work that's in a work order so that's an important clause because you want to make sure that you can perform that work at a uh for a price and within a time that is achievable um you do not want to be forced to accept work on terms that uh put you in a bad position to begin with and are not not achievable and so therefore it's important to be able to decline work also it's important to understand as you go from from state to state that you're complying with local licensing laws to the extent they apply to work that you're doing not contractors are not required to be licensed in every state but you might find that there are circumstances where um there are regulations that that you may not be able to comply with until you should have the opportunity to decline that work so the next slide will start to go through in a little bit more detail what the work order looks like we start by setting the time for performance so in article 2 you'll see these terms which are typical in the a 101 and that is that you know the date the date of commencement of work starts from either the date of the work order or a date issued uh in a subsequent notice to notice to proceed or by some alternative means if none of these boxes are checked uh the default is the date of the work order so on the next slide uh we'll see that substantial completion then is set either by a number of calendar days following commencement of the work or by a date a specific date identified in in the work order another thing to keep in mind in the work order is that in section 2.3.2 uh liquidated damages can be applied as well and in section 3.6 of the work order uh the parties can identify what those liquidated damages are so it might be that lds apply to some projects but not others and so that gives the parties flexibility again to negotiate terms that are appropriate for a particular scope of work that you're performing on the next slide you'll see the typical boxes for selecting the contract sum either a stipulated sun or cost of the word plus a fee without a limit or cost of the work plus a fee with a guaranteed maximum price or some other process it's important to note that the a 121 also has an exhibit a which includes those terms related to determination of the cost of the work so if you select either the second or third option there where it's cost of the work plus a fee it's very important that you remember to grab that exhibit a and make sure that those that exhibit a is appropriate for your project so it has all of those things that are uh that can be charged as cost of the work that that are um chargeable either against the gmp or um or other the cost of the work on a on a project where there's not a gmp um the other thing to keep in mind with uh uh the payment terms are that their retainage is set in the master agreement um and there is an opportunity to change that on a project by project basis in section 4.2 of the work order so while the master agreement might set an amount for retainage across the board there might be reasons why retainage is appropriate on a project or not or required to be at a higher rate because of some statutory requirements so keep in mind that that's also a flexibility that's built into a work order and then on the next slide we start to talk about the scope of the work it's simply described as the scope of the work described in the contract documents and we'll there's another slide a little bit later on that we'll look at exactly what those contract documents are so insurance is insurance is a interesting issue in the way that it's dealt with in the a121 general liability auto liability and employers liability are set in the master agreement and professional liability and pollution are set in the work order now i think the thought process there was that the general liability auto and employers would remain fixed and that you know pollution and and professional might be optional given the scope of the work it's important for both owners and contractors to keep in mind that these are are treated differently and and if there's a desire to have you know a uniform set of insurance requirements across all projects then the a121 will be modified um one one thing that i would anticipate is that given the scope of the work it might be necessary to increase general liability uh and so that might be um something that you can that you'll want to adjust in the in the work order section 5.1 of the work order is a fill-in point that allows for just those types of adjustments to the terms in the master agreement so um just want to keep track of those and how they're dealt with and um and and that there is a little bit of a nuance in in the different types of insurance and how they're treated uh the next slide identifies uh party representatives for the work order now keep in mind the master agreement has also identified party representatives it might be that the party representatives for each work order are different i know with our master service agreements we usually have those parties that maintain the client relationship sign the master agreement and then the parties you know the project teams the project manager who's actually delivering the work on a day-to-day basis would then find the service orders or work orders or task orders but however you want to do it it's up to you but keep in mind there are options there for having two different uh parties identified as um two different people identified as party representatives and then the next slide you'll see the enumeration of the contract documents they are of course the work order the master agreement and the master agreement is identified on page one of the work order as that master agreement executed between the contractor owner dated such and such so it's it's a specific uh work order that's identified and then other terms of course 714 identify specifications 715 drawings agenda and additional documents contractors might want to attach their bid just to have further clarity about what they are proposing on and any assumptions exclusions qualifications that might apply um so that's where in article seven on a project by project basis you'll identify those items that um define the this discrete scope of work for that particular project and then on the next slide uh you will see again how the master agreement works you have the a121 which has been fined at some point in the past the a221 which is then signed once the first project is issued or ordered and then that becomes your uh that becomes a contract so it's the 121 plus the a221 to form a contract and then the next slide shows how that works across multiple projects so it's the same 121 that was negotiated originally um but it applies then to all the projects that are ordered under it during its term um and and you may have you know one or 25 different projects that you're doing again just want to stress the importance of getting those terms in the a121 right some of the biggest problems that can arise from outside services agreements are having uh really onerous or problematic terms that that then are repeated over and over again so then i'll turn it over to jimmy who will give you a bit more of a comparison between the a101 and the a201 i'm sorry the a101 and the a121 sure thanks donovan so we're going to look now for the next couple of slides about sort of a compare and contrast between five or six of the big ticket items in the master agreements and just working off of the assumption that most of you may be familiar with the terms of the a101a201 uh some of our more popular documents being the you know the general the contract itself and the general conditions and how do those terms compare to your master agreement set up so one of the more intricate and interesting differences comes like donovan was saying when we talk about insurance so in your a101a 201 there is a separate insurance exhibit and that's your exhibit a so you fill out your a101 you negotiate it and potentially your a201 and then you look to your insurance exhibit you might work with your insurance professional to get that straightened out and get it agreed to as to what exactly the insurance requirements are going to be for your project whereas in the work order setup your insurance requirements are actually contained in both the a121 and a221 your a121 like donovan had referenced is more of your kind of general overarching insurance requirements and then your a 221 is going to have your project specific requirements anything that might be particularly unique about that project or may be particularly risky about that project you can adjust the insurance requirements that are in your master agreement and there's just sort of a fill point to do that for your property policy in your a101a 201 framework the property policy is usually issued for the total value of the project and it's usually on a replacement cost basis and that remains in effect through the period for the construction or the period for correction of work excuse me in your master agreement setup the owner is required to purchase your all risk policy but they do so for each work order in the amount of that quote project and then it also remains in effect through the period for correction of the work of that particular project so essentially you have the same uh policy you're all risk your builders risk whatever you want to call it in the amount of the project but it's for each work order essentially your 201 has optional additional insurance requirements where you can add various types of insurance requirements boiler machinery insurance maritime insurance etc it also allows for performance and payment bonds if they're going to apply to your particular project the performance and payment bonds for the a121 a 221 are contained the requirements for those are contained within each work order again so it's a separate requirement for each work order and that might be good or bad depending on your setup and how your business is run how your accounting is run particularly with respect to your insurance limits and your bonding capacity so it might be better from a risk management perspective for both the owner and the contractor to have payment bonds insurance etc on a per work order basis because then you can really tie that to your bonding capacity a little bit better and when you're done a particular phase for a particular project through the period for correction work those permanent profanement performance and payment bond requirements might lapse freeing up some of your bonding capacity so something else to think about there in your a101a2 there's no real direct mechanism for altering the insurance requirements while the project is ongoing um so if you want to do that in all likelihood you would have to execute you know maybe a g701 change order uh to modify those insurance requirements for that particular project whereas in your work order it's sort of anticipated that each one of those is unique enough to where you can agree to your master agreement terms then each work order can have its separate terms again you can modify within each work order if you need to using a change order or some other form but the thought is you likely don't have to because it might be a shorter time period looking at substantial and final completion your conventional documents a101a201 the contract is going to be effective through the life of the project so it is one contract that's effective through your life of the project and that might be your you know through the period for correction and work all of your warranty issues and then you know it might even go out as far as your maybe your ten-year stash limitations or whatever the case may be with your master agreement the master agreement itself the a121 like donovan was saying is effective for one year and then it automatically renews so you can sort of think about this a little bit whenever i read this i i'm reminded of a sort of like a residential lease where you have a one-year deal and 60 days from the end either party has to give notice if they want it to terminate at the end of that year and if they don't it automatically renews the sort of the savings clause within that that setup is the owner doesn't have to issue any work orders and the contractor doesn't have to accept any work orders so even if the parties um you know allow the the master agreement to continue on for another year there's no guarantee that additional work orders are going to come through and there's no guarantee that if they are requested by the owner that they have to be accepted by the contractor so it's a way to give the parties a little bit of flexibility in that regard your warranties and your correction work period this is one that gets a little bit more nuanced and actually creates potentially a helpful risk management tool and i'll explain what i mean by that so your a101 has like you're probably familiar with it as the one-year period for correctional work this is sometimes referred to as the one-year warranty it's it's not a warranty it's a period for correctional work and then there's a general warranty within the terms of the contract and all of that has a 10-year statute limitation on claims usually triggered after substantial completion of the work so from a risk management perspective you can kind of know and for lack of a better term you can underwrite your risk on that project going forward knowing how long you're going to be exposed to certain risks with the master agreement set up it's a way to manage your your risk in a sense because you're with each work order there's a one year period for correction of work uh on each project and then your general warranty with a 10-year limitation on claims after substantial completion so it looks the same but the thing to remember about this is particularly if you are doing a phased approach to a project and a phased work orders where like donovan was saying with the hospital as an example phase one might be in the year 2020 then you complete that work phase two might be from 2021 until 2023 and then phase three might be you know the next couple of years well your phase one work and your phase one substantial completion that clock starts running at the end of phase one um so it's not this uh where you wait until substantial completion of the entire project so at the end of that work order you can really then start to look at what your your potential risk is going forward on potential claims coming down the road and it's just something to think about from a risk management perspective for both owners and contractors on how that might affect their risk profile on certain projects do they want that do they not want that and how might that affect contract negotiations going forward with respect to payment this is sort of the last big ticket item that's maybe a little bit different so your payment applications for your standard set of contracts are submitted depending on the progress of the work right so depending upon where you are on the work or how the contract sum is calculated if we're looking at the a101 it's a stipulated sum but again we had referenced the a102 earlier if you're using a cost plus you're going to submit your payment applications depending upon how your contract summa structure and your product and your progress of the work whereas with your master agreement your payment applications are submitted for each project so you submit a payment application you might have multiple projects going on at the same time it's set up to require payment applications for each one of those different projects but the time and sort of the overarching structure of how payment applications are supposed to be set up and submitted are in your master agreement so they are the same and they remain constant through all of your different projects so it just gives you a little bit of uniformity where you might have you know let's say you have a large um owner that that you know is a bank like donovan had mentioned that's nationwide um well they might have a dozen different projects going on but your internal if you're a contractor your accounting folks always know that your payment applications are due on you know let's say the 15th of every month for that owner regardless of your project you you have to submit one for each project but at least it makes it predictable with respect to your expectation of when it's going to be submitted when it's going to be reviewed when payment can expect to be received etc for your retainage again your general retainage is going to be held under your general conditions your a101a201 whereas with your a121 it makes sense because you're submitting different payment applications on each one of those work orders you're going to be retainage is going to be held on each one of those work orders so the percentage might be the same and i believe the percentage for retainage is set forth in your master agreement but it can be modified in your work order and depending on your jurisdiction it might have to be modified if you're in a state that requires a certain amount of retainage or limit your retainage to a certain amount or maximize or sets a maximum that might have to be modified depending on your jurisdiction but it can be for each project and you know each work order your final payment looks the same the certificate the architect certificate for payment is going to look the same except in obviously with your a101 it's going to be for the entire project the single project all of the work and on your master agreement set up it's going to be your architect's certification is going to be just for that project just on that work order so you can think of it sort of like little mini projects that all sort of have the same general standard terms and conditions that apply to them we've been talking a lot so far about the master agreement set up as between the owner and the contractor but the does publish a set of master agreements for the contractor and the subcontractor and i'm going to turn it back over to donovan to talk a little bit about what's unique and maybe what's not so unique about the contractor subcontractor versions of these master agreements donovan sure so after the master agreement's negotiated then of course you turn to your subcontractor contracts to try to get your contractors lined up maybe you have some one-off contractors where the c401 is appropriate but quite often you might have contractor subcontractors who you want to perform across multiple work orders and so it makes sense to put in place a contract that will allow you to do that so on the next slide you can see uh how the a421 is set up uh the a port 21 of course once it's negotiated provides for the same type of enabling clauses that allow for execution of various work orders which are the a 422 the the if you're familiar with working with it i'm sorry not to see getting that confused with our b documents but if you're if you're familiar with working with the a401 uh you're going to be um familiar with the terms of the of the a422 on the next slide of course uh you'll have in the a422 the standard incorporation clause which incorporates the prime contract which is defined as the master agreement which you negotiated with with the owner and of course with the incorporation clause the subcontractor assumes towards the contractor the rights and remedies that the contractors assume towards the owner the 442 of course sets out the scope of work and and all the other economic terms that the contractor will our subcontractor will perform under and the the scope of work for the subcontractor is defined in the subcontract documents which are identified in article eight and those subcontract documents include the work order uh the um the the 421 the master subcontractor master agreement the prime agreement which is the master agreement with the owner and then any other documents that the subcontractor or contractor want to attach so it's pretty straightforward working very similarly and in tandem with the a121 and it's quite a useful document thanks donovan so we'll pause here for a second and see if anyone out there has any questions and if you do you can submit those using the chat function uh and i did want to add on just one thing to what donovan said that maybe i'll ask donovan a question or two about just some practical advice for these documents it can be a little tricky and the one thing i wanted to add was while we're waiting for any questions to come in is it's important to understand if you are using the subcontractor documents that you don't necessarily have to use both sets and i think diamond reference this is if you're using an owner contract or master agreement set you don't have to use a subcontractor master agreement set and vice versa it may work out that way for the structure of how your project is set up but it it might not and the prime agreement in the subcontract is subcontractor master agreement said it's just defined as the contract between the owner and the contractor so it could be something as full and robust as an a 101 a 201 it could be a master agreement it could be your abbreviated document a104 or a105 you know it could be it could be anything it doesn't even have to be an ai contract so that's important to remember that you don't have to necessarily have master agreements up and down the chain to to make it all work you definitely want to make sure your terms and conditions line up properly if you do it that way but you don't necessarily have to um and while we have maybe a minute or two while some more questions come in donovan you know i'm and working at the i'm not necessarily in the field representing clients anymore so not negotiating these documents day to day whereas you are have experience with these and are you know sort of in the weeds a little bit on these can you maybe offer just one or two um maybe lessons learned or quick tips for things to look out for when you're negotiating master agreements or maybe when you're performing work under a master agreement or in you know in the architects world of service agreement just some things that our attendees might find useful a quick tip or two sure yeah yeah sure so with master agreements as i said earlier it's a balancing act you want to make sure that you're leaving as much flexibility as you can to negotiate your economic terms on a project by project basis so you don't want to get locked into you know hourly rates or unit rates or prices that are not going to be profitable or workable as you move from location to location so when i think of some of the spectacular msa problems that we've had at hok it's been because uh there were um pricing terms that were locked in the master agreement that a you know a project might be profitable in in houston but it certainly wasn't profitable when it when we were doing a project in say new york where hourly rates are different so you want to make sure that you have the flexibility to to price and and set times and obligations in the service orders the other thing that i think is probably even more important for um construction master agreements would be the issue about withholding and set off of losses so owners these are going to be negotiated documents owners are always going to want to get into the contract a right to withhold the documents do not have that right which is a good reason for contractors and architects to use them but uh but if there is a right to withhold then what where it can be very problematic is if that uh if the the owner then has the right to set off losses from one work order against the work on another work order so what you have there is a situation where one business unit does a flawless job but it's being penalized because another business unit wasn't able to deliver the work and had some problems um that's going to run a muck across your entire project and so across the entire portfolio of work and so you want to make sure that you're that that right to set off is not not not one task or it's limited just if there's a right withhold it's limited only to the particular work in in a work order and doesn't cross into multiple work orders and then i think the other big problem that we have is um is that clients even though you may take a lot of time negotiating a very careful master service agreement clients then go into their typical procurement system and they start to issue uh purchase orders and in those purchase orders are usually a whole bunch of terms and conditions that you have taken a great deal of effort to negotiate out of your master agreement so if you're getting purchase orders make sure that you're looking at those terms and conditions and that they they don't apply to the work that's being issued under a particular work order um this is a this is a really big challenge for us and in making sure we have um you know uniform terms and conditions in master service agreements and and you know one way to address it is just to say in the in the task order or in the in the work order that um you know no purchase order will affect the terms and conditions of the master agreement so that they may issue a purchase order it may have all these onerous terms but they don't have effect on the work that's being performed um and then always have the right to decline work i think that's probably the best leverage that contractors and architects can have in a master agreement it's just you're going to reach a point where it just doesn't make sense to do a particular project and they're you know you shouldn't be obligated to do so um you should have an opportunity to back out of it great thanks donovan uh that's all very very helpful i'll pause here for a second and ask uh hostie if we did receive any questions come in just to make sure we get to those before our hour is up thank you so much jimmy and donovan we did have two questions come in uh the questions are how long is a master contract good for and can you use it over multiple years gotcha um donovan do you want to take that one yeah yeah um master agreements we've seen terms from you know two years to five years i it really doesn't make sense to run them out over five years and i think five years is a pretty long time um usually two to three years are the typical time frames that we're looking at and that and that's because you know you're any pricing that gets locked into the master agreement becomes stale very quickly and so you know you don't want to be locked into rates in 2020 that were appropriate in 2015. um and so that's that's that's probably the big thing to keep an eye on um but you know having a one year with a renewal i is a is a rare thing it's a good thing i would like to see it in more contracts um and you know then it gives us the ability to um reassess where we are on each year and whether or not we need to renegotiate those those economic terms that were locked in definitely and i will just in response to that question if you look at the master agreement document itself it's going to be sections 1.1 1.2 and 1.3 is what donovan just described and the standard language of the master agreement has it be effective for one year and obviously you can modify that and then there is that what's sort of referred to as an evergreen clause that says that it will automatically renew year upon year unless each or either party gives 60 days notice prior to the date of renewal so the date that you sign the master agreement your one year clock starts running and it's good for a year and then it automatically renews for another year on that same date unless you give 60 days notice that you uh don't want to renew the master agreement and that's in article 1 of your master agreement um great enough sorry sure go ahead we did have another question um do change orders fall under the master agreement as well the change order process is defined under the master agreement but your change orders are going to be work order specific so um you know you're gonna they'll they'll arise on a project by project basis but the but the um conditions for when a change order is appropriate and the process for uh approving change orders that's all set in the master agreement yes exactly um thanks donovan that's going to be i think it's article 11 changes in the work of your master agreement so your sort of your general procedures for how to go about amending your either your master agreement or your work order is going to be set out in the master agreement itself uh most of those terms but then you're in all likelihood you're going to be modifying the work order itself if you want to modify an amount or a substantial completion date or you know in all likelihood you're going to be adjusting the contract sum or something like that you're going to be actually changing using the change order changing the work order but how to go about doing that is going to be in the master agreement yeah if you need to go back and change the terms of the master agreement that usually is accomplished by amendment so that would be a different process than a change order process yep so if anyone has any other questions um this is how to go about reaching us so on ai contracts.org learn there's a bunch of information just generally about our contracts and videos and articles and tutorials about how to use the software and also the content of the documents itself in that regard if you have questions about the content so you know what a clause means you know how contracts are supposed to be used in tandem etc you can either email us or call us in the telephone um using those the information in the middle of your screen and at the bottom of your screen the tech support information is if you're having questions about the software itself so how to download a document how to save a document how to complete a change order things like that that would be more your tech support type questions and you can email us at techsupport aicontracts.org or call a telephone number on your screen and then lastly i did want to mention we have added a youtube channel that has sort of a bunch of quick how-to videos explaining the terms of some of our contracts so for example if you have questions about we just recorded one about the notice provision um and how that works and why it's set up the way it is it's just a quick five or six minute video but we have found got a lot of feedback saying that people found that helpful so if you want you can check out our youtube channel and subscribe to that to get noticed when or notified when it is updated and with that i do want to take the time to thank donovan for taking time out of your day and thank all of us or everyone attending uh for taking time out of your day as well to spend some time with us and learn about our master agreement and work order set donovan hosti thank you very much thank you very much and just a reminder that you will receive an email with the video with the recording as well as the powerpoint again thank you to donovan and jimmy for presenting this thorough webinar and thank you to our attendees for joining us today