CONSTRUCTION CONTRACTS AND YOUR “ORDER OF PRECEDENCE” CLAUSE

UnknownDuring the negotiation of construction contracts there is often consideration as to the priority of the Contract Documents.  In other words, in the event of a conflict with the Contract Documents, what is the priority that you want to govern the conflict?  To address this, parties may include an order of precedence clause that clarifies how conflicts with the Contract Documents are to be interpreted by prioritizing the Contract Documents.

 

The AIA Document A201 (General Conditions) deems the Contract Documents as complementary (see § 1.2.1 -“The Contract Documents are complementary, and what is required by one shall be as binding as if required by all….”) without including an order of priority to determine which Contract Document truly governs a conflict.  The AIA does not really favor establishing an order of precedence;  but, if supplementary conditions are added to modify the A201 General Conditions, the AIA does suggest model language:

 

§ 1.2.1.1 In the event of conflicts or discrepancies among the Contract Documents, interpretations will be based on the following priorities:

1. Modifications.

2. The Agreement.

3. Addenda, with those of later date having precedence over those of earlier date.

4. The Supplementary Conditions.

5. The General Conditions of the Contract for Construction.

6. Division 1 of the Specifications.

7. Drawings and Divisions 2–49 of the Specifications.

8. Other documents specifically enumerated in the Agreement as part of the Contract Documents.

 

 

The EJCDC C-700 (General Conditions) contains virtually identical language as the AIA A201 deeming the Contract Documents as complementary: (see § 3.01.A- “The Contract Documents are complementary; what is required by one is as binding if required by all.”)

 

The ConsensusDocs 200 (Agreement and General Conditions) takes a much more proactive approach regarding conflicts by containing the following clauses:

 

14.2.2 In case of conflicts between the drawings and specifications, the specifications shall govern….

 

 14.2.5 ORDER OF PRECEDENCE In case of any inconsistency, conflict, or ambiguity among the Contract Documents, the documents shall govern in the following order: (a) Change Orders and written amendments to this Agreement; (b) this Agreement; (c) subject to subsection 14.2.2 the drawings (large scale governing over small scale), specifications and addenda issued prior to the execution of this Agreement or signed by both Parties; (d) information furnished by the Owner pursuant to subsection 3.13.4 or designated as a Contract Document in section 14.1; (e) other documents listed in this Agreement. Among categories of documents having the same order of precedence, the term or provision that includes the latest date shall control. Information identified in one Contract Document and not identified in another shall not be considered a conflict or inconsistency.

 

 

Even Federal Acquisition Regulation 52.236-21 incorporated into government prime construction contracts contains language that, “In the case of difference between drawings and specifications, the specifications shall govern.”

 

There are certainly pluses and minuses to creating an order of precedence provision.  A minus is that implementing a provision takes away from the complementary nature of the Contract Documents.  Thus, whatever hierarchy you determine and include is a hierarchy you need to understand because you will be living by it. There is also the concern that the provision is incorporated to perhaps serve as a substitute for properly executed, coordinated, and detailed plans and specifications or is incorporated to reduce the contractor’s risk to check the Contract Documents to address any inconsistencies on the front end.   On the other hand, as a plus, these clauses provide necessary guidance in the event there is a claim due to a conflict with the Contract Documents. Most of the time, I tend to favor an order of precedence provision to prioritize direct conflicts in the Contract Documents.  Depending on whether you are the owner, the contractor, or even a subcontractor, forethought should be given to the order of precedence of the Contract Documents since there is a good chance this order will be relied on once construction commences.

 

 

imagesTo illustrate the application of an order of precedence provision, in Hensel Phelps Const. Co. v. U.S., 886 F.2d 1296 (Fed.Cir. 1989), a prime contractor sought an equitable adjustment of its contract. The contractor relied on an order of precedence provision that required the specifications to govern over any conflict between the drawings and specifications (see routinely incorporated F.A.R. 52.236-21).  In this case, the specifications called for a minimum of 18” of fill under concrete floor slabs; however, the drawings called for 36” inches of fill.  The contractor priced the job with the 18” of fill.  During construction, the contracting officer directed the contractor to install 36” of fill which triggered the equitable adjustment.   The government, however, argued that the contractor knew of this discrepancy all along.  The Federal Circuit Court nevertheless held that the contractor should be entitled to an equitable adjustment since the specifications had priority over this direct conflict:

 

Reliance was properly placed on the order of precedence clause to resolve a discrepancy between the specifications and the drawings and this resolution was reflected in the bid. When the government insisted on 36 inches of fill, rather than the 18 inches called for in the specifications, the contractor was required to perform more work than the contract required and more than its bid price contemplated. Consequently, on the record here neither Hensel Phelps [prime contractor] nor Watts [subcontractor] can be said to have profited or otherwise benefited by reliance on the order of precedence clause.” 

Hensel Phelps, 886 F.2d at 1299.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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