Changing times are bringing new challenges to general contractors, such as "reverse auction" bidding on the Internet and mold litigation, but they also are possibly bringing a new and better relationship with subcontractors.

The ins and outs of the New Age were explored at the midyear meeting of the Associated General Contractors Sept. 19-22 in Boston. Some AGC contractors are concerned about what they say is the alarming growth in reverse auction bidding on projects offered by major owners. This brand of Website bidding now is being used by three major U.S. automakers, some large discount retailers and pharmaceutical manufacturers, said David B. Hanson, senior vice president of Walbridge Aldinger Co., Detroit, and acting chairman of AGC's national regional contractors committee.

RELATIONSHIPS AGC President Larry Gaskin is set to sign new partnering agreement with subcontractors group.

With reverse auctions, the owner typically solicits quotes from anonymous bidders, who are given specified times to lower their bids in an effort to win the project. The result is a feeding frenzy akin to bid shopping, Hanson said.

AGC does not oppose electronic bidding, but feels that this form treats construction as a commodity. "Construction is a service not to be treated as a commodity," said AGC President Larry C. Gaskins. "If a reverse auction is going to be used, we need to preserve the integrity of the bid process and prevent the bid-shopping aspects."

Contractors in the Detroit area have formed an advisory group to start a dialogue with the major owners to bring value to the process. "We were initially concerned about the integrity of the process and the potential use of phantom bidders to drive prices down," Hanson said. "The rules are not clearly defined and the process needs more openness." One suggestion was to post the winning bid and the contractor's name and to use pre-qualified bidders.

Gaskins and other AGC contractors also are worried about the growing risks associated with mold on projects. President of L.C. Gaskins Construction Co., a mid-sized building contractor in Jacksonville, Fla., Gaskins said the environmental issue is a problem in his home state and nationally. Gaskin formed a mold litigation task force in March to educate AGC members about the issue and to develop best practices for avoiding litigation.

RISK FACTOR Mold litigation also grows. (Photo courtesy of CH2MHill)

One step is to join with owners and other construction team members to avoid adversarial relationships. "It's a high-priority issue that we need to handle immediately," Gaskins told ENR.

The hardening insurance market is forcing contractors to pay more attention to the issue, said AGC General Counsel Michael E. Kennedy. Many insurers are excluding mold in policy renewals, while some are allowing some coverage under pollution liability. "But it is not the same coverage and that's a big issue," said Kennedy. He also noted that defense costs are commonly counted against the limit of the policy, which reduces coverage for claims.

"Contractors need to talk to owners about mold because many of their decisions impact the mold problem and could increase or decrease the risk," said Kennedy. "It is better to manage the risk up front and establish best practices as to what is reasonable risk management." AGC is working on a booklet for contractors and clients on risk factors that should be done by December.

Gaskins also is working to build a new relationship between AGC and subcontractors. "We are working on a partnering agreement with [the American Subcontractors Association]that will improve communication between staff and association leadership and help develop best practices for critical issues such as prompt pay. [Subs] are such a big part of a general contractor's success or failure," he said. A pact could be approved by November.