Question:
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Ken,
This is my second submission to your daily e-mail letter. Your daily Internet forum provides businesses in the industry with invaluable insight regarding the issues that are faced by all of us. We try to run our operation using sound business principles. The information we glean from your expertise assists us continuously. Often, it confirms what we believe are the correct ways to approach various situations.
We use your contracts exclusively and appreciate their comprehensive nature. In a lousy economy, our business and employee base has grown significantly during the past four years and we believe that you indirectly helped. No, I'm not "sucking up to you"...just being honest and appreciative.
That said, there is one segment of business in our industry that really irritates me...the larger general contractor. When you bid on larger projects as a sub-contractor, the general contractor almost always wants you to complete and sign a "Vendors Package". Basically, they want you to sign away all of your rights as a sub-contractor on the job and add them and all of their distant relatives as "additional insureds" on your general liability policy. Unfortunately, In this case, your contracts do not assist us because they (GC'S) don't sign them.
We have won numerous bids, but refuse to bend to the GC's abusive "vendors package". The GC's that are familiar with the cost effective, quality work our company provides will sometimes waive the "vendors package" to have us complete our portion of the project (fire, security, cctv, etc.). However, most larger GC'S will not waive completion of the "vendor package". In essence, they want you to fund (parts and labor) what becomes their job and you, as a sub-contractor are forced to wait and see if you are going to be paid all or part of your invoice in 60-90 days. You become, what I call, an involuntary Indentured Servant if you want the job. What happened to the concept, "I do the job and you pay me in a timely fashion"? In the past we have lost many of thousands of dollars due to GC practices and bankruptcies. So, we have learned from the pain of financial loss.
Therefore, I'm looking for an answer to this situation. Do we need to form a sub-contractor association and refuse to bend to the predatory actions of large contractors? When did we become financial institutions that fund the GC'S jobs? I know we are not the only small to mid-sized company that has faced this situation.
Do you or anyone else in your forum have thoughts regarding an answer to this pervasive problem?
Steve
S.W. Florida
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Answer:
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Thanks for the compliments. I do devote a lot of time to this forum and hope it is helpful to the industry.
The problem with your subcontractors association idea is that not everyone will join and there will be plenty of subs ready to take on work no matter what they have to sign.
All properly worded alarm contracts contain provisions contracting away liability for the alarm company's negligence, essential provisions due to the nature of the service, the amounts charged for those services and the incalculable damages that can arise from alarm systems failing to prevent occurrences they are designed to detect.
When you don't use your alarm contracts and are forced to sign general contractor's contracts or subscriber's contracts you can be sure that you are not going to have contract protection, and in fact you are more than likely to be undertaking responsibility and exposure that you shouldn't have to. But, not many sub contractors, or alarm companies dealing direct with their subscribers for that matter, are going to pass up a lucrative job, even if it means not using the alarm contract and signing the subscriber's or general contractor's form contract. In that case you are sort of closing your eyes, crossing your fingers and hoping everything goes smoothly and works out.
There are a few ideas you can try when negotiating your deal with the insistent general contractor or large subscriber. Insisting that their contract not be used and your contract signed is usually not going to work. Getting them to change the problem [for you] provisions in their contracts is also going to be difficult. You'll get the same answer you probably give your subscribers when they ask for changes in your contracts - you can't give them much change and you tell them your lawyer prepared the contract and you can't change it. So, what might work better and give you the most protection.
Explain that the general contractor's and subscriber's contract form is generic and certainly not specific to your deal, the installation of an alarm system. Your contract does address many the issues for that installation. Ask to include in the general contractor's or subscriber's contract a provision that "Alarm Company's standard form contract is annexed hereto and to the extent not inconsistent with the terms of this agreement shall govern."
Depending on how deep a hole the contract digs for you - in terms of things you agree to - like indemnifying the GC or Subscriber; guaranteeing your performance and the system, etc- your standard contract may address things not in the main contract and therefore provide you protection. Your exculpatory clause, for example, may not be inconsistent with anything in the main contract, and would therefore govern.
Bottom line, there are going to be jobs you are going to take where you won't be signing your contract. You should still have proper contracts and use them when you can. You should also make sure you are fully covered with adequate insurance that does not require the use of your approved contract to invoke coverage of a particular claim.