Construction Manager as Constructor (CMC) contracts are a common project delivery method in Indiana, especially for public construction. These agreements structure how large-scale developments are planned and executed. Understanding Indiana’s legal requirements for these contracts helps avoid disputes and ensures compliance. This article outlines these legal elements.
Governing Law and Statutes
State statutes are the primary legal guide for Construction Manager as Constructor (CMC) contracts in Indiana, particularly for public works projects. These laws establish rules for how public entities and contractors must operate. For instance, specific Indiana Codes detail procedures for public works undertaken by local governments, covering aspects like bidding, contract awards, project execution, payment terms (including retainage), and how contract changes are handled.1Justia Law. Indiana Code Title 36, Article 1, Chapter 12 – Public Work Projects
Other state laws address public construction more broadly, including requirements for contractor qualifications, the bidding process, and prevailing wage standards where they apply.2Justia Law. Indiana Code Title 5, Article 16 – Public Works (2024) Indiana’s public procurement laws also influence CMC contracts by setting guidelines for how state and local entities acquire construction services.3Justia Law. Indiana Code Title 5, Article 22 – Public Purchasing (2024) Together, these statutes aim to ensure fairness and transparency in public projects.
Licensing and Permitting Obligations
Indiana does not issue a statewide license for general contractors, including those in CMC roles. However, licensing and registration are often required at the local level by counties or municipalities. CMC firms must check and follow the specific rules of the project’s location, which can include registration, bonding, and insurance requirements.
Architects or engineers providing design services under a CMC agreement must hold state-level professional licenses, overseen by the Indiana Professional Licensing Agency.4Indiana Professional Licensing Agency. About the Indiana Professional Licensing Agency CMCs need to ensure that any design work, whether done in-house or subcontracted, is performed by licensed professionals.5Indiana Professional Licensing Agency. Architects & Landscape Architects Licensing Information
The CMC is responsible for obtaining necessary construction permits (like building, electrical, and plumbing) from local building departments before work begins. All construction must adhere to statewide building codes, which are enforced locally.6International Code Council. Indiana Codes This process includes passing inspections to receive a certificate of occupancy.
Main Contract Provisions
Important terms within a CMC contract define the project’s operational and financial aspects and outline the relationship between the owner and the CMC.
Payment Terms
The contract’s payment terms clearly define the financial arrangements. These terms specify the contract sum, which might be a guaranteed maximum price, a lump sum, or a cost-plus-fee. For public projects, payment structures, especially retainage amounts and their release conditions, must follow state guidelines. The terms also detail the payment schedule, which can be linked to project milestones or monthly progress, and list necessary documentation for payment requests, like lien waivers.
Scope and Responsibilities
Clearly defining the scope of work and the responsibilities of both the owner and the CMC is important. This section describes the project, including design specifications, quality standards, and performance requirements. The CMC’s duties cover pre-construction services like cost estimating and scheduling, construction execution, subcontractor management, site safety, and quality control. The owner is responsible for providing project information, site access, timely decisions, and funding.
Liability and Indemnification
Liability and indemnification provisions in a CMC contract allocate project-related risks. Liability clauses outline each party’s responsibility for damages or losses. Indemnification clauses require one party to cover the other’s losses from specific events, such as negligence or breach of contract. Indiana law carefully reviews indemnification clauses, especially those where a party tries to be indemnified for its own negligence. For instance, Indiana Code 26-2-5-1 makes certain agreements void if they attempt to cover liability for death, bodily injury, or property damage caused solely by the negligence or willful misconduct of the party being indemnified.7Justia Law. Indiana Code § 26-2-5-1: ‘Construction or Design Contract’; Indemnity Agreements Against Public Policy as Void and Unenforceable; Exceptions This law impacts how indemnification clauses are written in Indiana construction agreements.
Dispute Resolution Procedures
CMC contracts include methods for resolving disputes, aiming to do so efficiently and avoid lengthy court battles. Common approaches are direct negotiation, mediation (where a neutral third party helps reach a settlement), and arbitration (where an arbitrator makes a decision that can be binding). The contract may specify details like arbitration rules and the location for these proceedings.
Penalties for Noncompliance
Not meeting legal or contractual obligations under a CMC contract in Indiana can result in penalties. The specific penalty depends on the nature of the noncompliance, project type, and contract terms. For example, ignoring prevailing wage requirements on applicable public works projects can lead to orders for back payment and civil penalties from the Indiana Department of Labor.8Indiana Department of Labor. Common Construction Wage Home
Failing to comply with state building codes or permitting requirements can cause stop-work orders, project delays, and fines from local agencies. If individuals perform design work without the necessary state licenses, the Indiana Professional Licensing Agency can impose sanctions, including civil penalties for each violation and other disciplinary actions.9Justia Law. Indiana Code § 25-1-11-5: Practitioner Compliance With Professional Standards; Findings Meriting Disciplinary Sanctions
On public projects, serious or repeated noncompliance can lead to debarment, which means a contractor is banned from bidding on future public works.10Justia Law. Indiana Code Title 5, Article 22, Chapter 16 – Qualifications of Offerors; Suspension and Debarment This can happen if a contractor is deemed non-responsible.
Enforcement and Litigation
If dispute resolution methods like negotiation or mediation fail, parties might resort to formal legal action, such as filing a lawsuit. This process involves several stages, including filing a complaint, exchanging information (discovery), pre-trial motions, and potentially a trial before a judge or jury. After a trial, a judgment is issued. Parties unhappy with the outcome may have the option to appeal the decision to a higher court, such as the Indiana Court of Appeals or the Indiana Supreme Court, for a review of legal errors.
Amendments and Modifications
Changes to a CMC contract in Indiana must follow contract law and the agreement’s terms. All modifications to scope, schedule, or cost need mutual agreement and should be in writing and signed by both parties. Consideration, where each party receives something of value, is also required.
For public CMC contracts, state laws ensuring public interest may add requirements to the amendment process. Change orders, for example, may need to follow specific procedures detailing the alteration, costs, and timeline impacts.