Masonry Magazine February 1995 Page. 14
subcontractor's work.
Paragraph 14.2 addresses progress payments. Subparagraph 14.2.2, which covers partial lien waivers and affidavits, prohibits the contractor from requiring the subcontractor to sign an unconditional waiver of lien or claim, either partial or final, prior to receiving payment or in an amount in excess of what it has been paid.
Paragraph 14.2.4 covers retainage and contains several important differences from the 1990 AGC 600. For example, under Subparagraph 5.2.2 of the AGC 600, the rate of retainage on the subcontractor shall be equal to the percentage retained by the owner from the contractor's payment "provided the subcontractor furnishes a bond or other security to the satisfaction of the contractor." Under Subparagraph 14.2.4 of the new form, the equal rate of retainage is not contingent on the subcontractor furnishing a bond.
If the subcontractor does furnish a bond, the rate of retainage may be set at "a lower rate or zero." If there is no provision for retainage in the contract between the owner and the contractor, the contractor may not set a rate of retainage higher than 10 percent for the subcontractor.
Subparagraph 14.2.7 of the new subcontract covers time of payment to the subcontractor and reflects a major shift from the pay-when-paid philosophy of the 1990 AGC 600. Subparagraph 14.2.7 provides that progress payments to the subcontractor shall be made no later than seven (7) calendar days after receipt of payment from the owner by the contractor. If, through no fault of the subcontractor, the contractor does not receive payment from the owner, the contractor "will make payment" to the subcontractor "within a reasonable time."
Paragraph 14.2.8, which addresses payment delay, also departs from the AGC 600. Under the new subcontract, the subcontractor becomes entitled to an increase in the subcontract price and subcontract time based upon the increase in the subcontractor's reasonable cost of shutdown, delay, and start-up. Subparagraph 5.2.6 of the AGC 600 allows the subcontractor only an increase in the contract price to the extent obtained by the contractor under the contract documents.
Several new, important rights are granted to subcontractors under Paragraph 14.3, which covers final payment. The most important change is in Subparagraph 14.3.4, which provides that if final payment from the owner for the subcontract work is not received by the contractor and the delay is not the fault of the subcontractor, then the contractor will make payment to the subcontractor "within a reasonable time."
Article 11-Insurance
With a few exceptions, most of the insurance requirements found in Article 13 of the 1990 AGC 600 are found in Article 11 of the new AGC/ASA/ASC form.
A significant change from the requirements of the 1990 AGC 600 occurs in Subparagraph 5 of Paragraph 11.4 of the new subcontract. The new subcontract requires the subcontractor to "maintain" completed operations liability insurance for one year after acceptance of the subcontract work or substantial completion of the project, or the time required by the subcontract documents, whichever is longer. The AGC 600 requires the subcontractor to carry the insurance "for at least two years after final payment."
One of the important new rights granted to subcontractors provides that if final payment from the owner for subcontract work isn't received by the contractor and the delay isn't the fault of the subcontractor, then the contractor will make payment to the subcontractor within a reasonable time.
Paragraph 11.6 of the new subcontract also contains a major change from the AGC 600, this one with respect to the contractor's obligations to the subcontractor regarding the existence of builder's risk insurance for the project. Subparagraph 11.6.1 provides that upon written request of the subcontractor, the contractor shall provide the subcontractor with a copy of the builder's risk insurance policy or any other "property" or equipment insurance in force for the project and procured by the contractor. The contractor is required to "advise" the subcontractor if a builder's risk insurance policy is not in effect.
In Paragraph 13.5 of the AGC 600, the subcontractor is required to satisfy itself as to the existence and extent of the insurance prior to commencement of the subcontract work. The AGC 600 thus places obligations in this area squarely on the shoulders of subcontractors without giving them a clear-cut means to enforce it.
Article 5-Surety Bonding
Article 5 of the AGC/ASA/ASC form consolidates into one section all surety bonding matters concerning the contractor's bond and the subcontractor's bonding requirements, if any. The 1990 AGC 600 did not have a separate section addressing surety.
Paragraph 5.1 states that the subcontractor is entitled to receive from the contractor, upon request, copies of any payment and performance bonds furnished by the contractor for the project. Subparagraph 9.6 of the AGC 600, in less unequivocal language, allows the subcontractor to review and copy the payment bond. The 1987 AIA A401 provides, in Subparagraph 13.6, that the subcontractor may review and copy any bond covering the contractor's payment obligations for the project.
Although the language in the new subcontract represents only a slight change, it clarifies the contractor's obligation to provide the bonds. The subcontractor is now in a better position, contractually, to seek complete information about the bonds the contractor has purchased.
Paragraph 5.2 governs subcontractor bonds. Subparagraph 3 provides that the subcontractor shall be reimbursed, without retainage, for the cost of required bonds with the first progress payment made under the subcontract. A blank space is provided for the parties to specify the percentage of reimbursement for the subcontractor's bond(s). The AGC 600 simply provides that the reimburse-