Administering Employers’ Payment Obligations under National and International Design–Build Standard Forms of Contract

It is well-established that disputes have adverse effects on cost, delivery dates, and quality of construction projects. Studies have shown that poor contract administration is yet the leading cause of disputes. One of the core elements in construction contracts is payment. Although contractual provisions—including employer’s payment obligations—are usually expressly sated in contracts, they are sometimes misunderstood and/or misapplied, leading to major impacts on projects and firms. The objective of this paper is to present guidelines for appropriate administration of the employer’s payment clauses under the most widely used national and international design-build contracts. The paper focuses on the design-build delivery system for its emerging wide use in large-scale construction projects. The authors studied the provisions related to employer’s payment obligations under multiple standard design-build forms of contract including those published by the American Institute of Architects (AIA), ConsensusDOCS, the Engineers’ Joint Contract Documents Committee (EJCDC), the International Federation of Consulting Engineers (FIDIC), the Joint Contracts Tribunal (JCT), and the New Engineering Contract (NEC). In doing so, the authors used a multistep research methodology that included: (1) classifying the causes of contractual problems related to poor administration of employer’s payment provisions; (2) analyzing the conditions for employer’s payment obligations in the studied contracts, the associated required procedures, and the interrelated repercussions for failure to such provisions; (3) presenting a detailed comparison showing the commonalities and differences between the different contracts; and (4) developing a checklist of the important contractual considerations in payment provisions. The direct outcomes of this research will enable stakeholders to quickly review payment provisions in different standard forms and assist them in selecting the proper form that suits their project. Moreover, the proposed checklist will act as a tool for stakeholders to assess their understanding of a project’s contractual clauses and as a guideline for drafting new contracts. To the authors’ best knowledge, this is the first study of its kind and is the most comprehensive in its approach and associated analyses. By educating owners and design-builders about contractual payment considerations, this study should promote efficient and effective contract administration, thus minimizing disputes and enabling parties to mitigate the related consequences during the course of their projects.