SUBSIDIARY NEGOTIATION ISSUES Sample Clauses

SUBSIDIARY NEGOTIATION ISSUES. 5.1 Subcontractors, Consultants, and Joining Agreements. Contractors and Architects rarely perform their full contractual scope of work, delegating much of their scope to subcontractors and consultants. Architects may retain less than half of the total design fee and some contractors retain no self-performed work, at all. If IPD seeks to energize the people actually doing the work, it must clearly engage subcontractors and consultants. Moreover, if IPD is to provide the owner with a sufficient buffer against cost overruns, the subcontractors and consultants—or at least the key participants—must also share in the risk/reward structure.35 Because IPD is a collaborative, trust—based delivery method, the consultants and subcontractors chosen must embrace IPD and must be able to work co-operatively with the other parties. Thus, in most IPD structures, the subcontractors and consultants are jointly chosen by the owner, designer, contractor team, or the team has interview and veto rights over the designer’s and contractor’s preferred consultant and subcontractor choices.36 There are two primary methods for incorporating the key con- sultants and subcontractors: subagreements and joining agreements. In the subagreement approach, the key IPD elements flow through the prime agreement (designer or contractor) into the subagreement (consultant or subcontractor). This includes key risk and reward terms as well as any liability limitations and waivers. The at—risk compen- sation of the subcontractor or consultant is a portion of the at—risk compensation of its respective prime. In almost all instances, the busi- ness structure of the subagreements mirrors the business structure of the IPD agreement, except that the subcontractors and consultants are less involved and have no or limited voting rights at the project management level. In a joining agreement approach, the key subcontractors and con- sultants execute an agreement that amends the IPD agreement to add them as a party. The risk/reward provisions are amended with each 35 As a general rule, at least half of the anticipated construction cost should be within the risk/reward structure, and preferably more. 36 Another option is to have each new project participant interviewed by the entire team that precedes it. Although this may work on smaller projects, it becomes increasingly cumbersome as the number of project participants increases. added key subcontractor or consultant to reflect the amount of com- pensation t...