Michael Paul and Jacob Carruthers | Dinsmore & Shohl
Contracts
Construction contracts
What standard contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution?
The construction and design industry in Colorado frequently utilizes standard contract forms developed by well-established organizations, including:
- American Institute of Architects (AIA) Contracts: It is common for Colorado construction and design industry professionals and entities to use standard contract forms published by the AIA for a wide range of projects, such as AIA A101 Standard Form of Agreement between Owner and Contractor; A201 General Conditions of the Contract for Construction; and AIA B101 Standard Form of Agreement between Owner and Architect.
- ConsensusDocs: These are another set of widely recognized contract forms, such as ConsensusDocs 200 (Standard Agreement and General Conditions Between Owner and Constructor) and ConsensusDocs 240 (Agreement Between Owner and Design Professional).
- EJCDC Contracts (Engineers Joint Contract Documents Committee): EJCDC contracts are often employed for engineering projects in Colorado, particularly in public works and infrastructure projects. These documents are recognized as industry-standard contracts for engineers, architects, and public project owners.
- Colorado Department of Transportation (CDOT) Contracts: CDOT has its own set of standard contract forms for public infrastructure projects (e.g., highways, bridges). These contracts align with Colorado-specific rules for public projects, discussed in more detail below.
Some Colorado-specific public contracts may use forms developed by local agencies to ensure that requirements under Colorado and local laws and regulations are included.
Language of contract
While Colorado law does not mandate that construction contracts be in English, it is the de facto standard for legal contracts in the state. This is due to the practical need for clarity in communications and the fact that section 13-1-120 requires courts in Colorado to conduct proceedings in English.
Restrictions on choice of law and venue for dispute resolution
Choice of law: Colorado law generally allows parties to choose which state’s laws will govern their contract. As an example, section 4-1-301, which applies to contracts involving the sale of goods, parties may choose the governing law their agreement. In the context of a construction project, the statute could apply to the purchase of materials (e.g., steel, wood, or fixtures) from a supplier. There are, however, limitations. The primary exception is that a court may invalidate a choice-of-law provision if it violates Colorado’s public policy.
Venue for dispute resolution: Venue is typically based on where the defendant resides, where the incident occurred, or where the property involved in the dispute is located. However, parties may include a choice-of-venue provision, sometimes referred to as a forum-selection clause, in their agreements specifying where suit may be brought. These provisions are generally considered valid unless show the be unreasonable under the circumstances, fraudulently induced, or against public policy.
Payment methods
How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments?
In Colorado, contractors, subcontractors, vendors, and workers are typically paid according to the terms specified in their contracts, but there are some common industry practices and legal standards regarding payment frequency and mechanisms.
Contractors
- Progress Payments: Contractors typically receive progress payments at regular intervals, such as monthly or based on specific project milestones. These payments are calculated according to the contract terms. For example, section 24-91-103 requires a contract for a public works project to provide for partial payments on at least a monthly basis. For private projects, the contract will usually specify progress payment terms, and state law ensures that these payments are made in a timely manner.
- Retainage: Retainage in Colorado is generally between 5% and 10% of each progress payment that is usually withheld until the project reaches substantial completion. For public projects, section 24-91-103 limits retainage to no more than 5%. For private projects, the retainage percentage is determined by the contract, but it must be reasonable.
- Final Payment: The final payment is made when the project is substantially complete, and the contractor has fulfilled all contract obligations. This ensures compliance with the Colorado Mechanics Lien Law (section 38-22-101 et seq.), which governs lien rights and the release of final payments.
Subcontractors and vendors
- Progress Payments: Colorado law requires that contractors pay their subcontractors within a specific period after receiving payment from the project owner. For public projects, section 24-91-103(2) makes it mandatory that contractors pay subcontractors and suppliers within seven days of receiving payment for public projects. For private projects, the payment terms are generally outlined in the contract.
- Retainage: Subcontractors and vendors are subject to the same retainage terms as general contractors, with retainage typically withheld until project completion. For public projects, section 24-91-103 limits retainage to 5%, and for private projects, the amount and timing of retainage are usually determined by the contract.
- Vendor Payments: Vendors are typically paid based on the delivery of materials or equipment as specified in purchase orders or contracts. Generally, retainage is not applied to vendor payments, making them less complex than contractor or subcontractor payments.
Workers
- Payment Frequency: Workers must be paid according to section 8-4-103, which requires that employees be paid at least once a month or more frequently if specified in the employment agreement.
- Wage Laws: Colorado wage laws, in conjunction with the Fair Labor Standards Act (FLSA), regulate wage payments, including overtime pay. Under section 8-4-101 et seq., non-exempt employees are entitled to overtime pay for hours worked beyond 40 hours per week or 12 hours per day. Overtime pay must be at least 1.5 times the regular hourly rate, as outlined in section 8-6-101 et seq. and COMPS Order #38.
- Prevailing Wages: For public works projects, Colorado enforces prevailing wage laws under section 24-92-201 et seq. These provisions require workers on public construction projects be paid wages comparable to the local prevailing rates for similar work. The Colorado Department of Labor and Employment sets and enforces these wage rates.
Mode of payment for contractors, subcontractors, vendors, and workers
Contractors, subcontractors, vendors, and workers in the state are typically paid through various methods, including checks, electronic funds transfers (EFT), direct deposits, and payroll cards. The specific mode of payment depends on the contract terms and industry practices. Contractors and subcontractors often receive payments via checks or EFTs, while workers are usually paid through direct deposit or payroll cards. Vendors might be paid through purchase orders with net terms, wire transfers, or credit cards. Ensuring timely payment through these methods is crucial for compliance with Colorado law and maintaining good business relationships.
PPP and PFI
Is there a formal statutory and regulatory framework for PPP and PFI contracts?
Colorado has a formal statutory and regulatory framework for Public-Private Partnerships (PPP) and Private Finance Initiative (PFI) contracts, particularly concerning transportation and infrastructure projects. While PPPs and PFIs in the state are commonly used in the development of public works, highways, and transit systems, there are specific statutory provisions governing these agreements:
- Section 43-1-1202 gives the Colorado Department of Transportation (CDOT) the authority to enter into agreements with private entities for the design, financing, construction, operation, and maintenance of transportation facilities in Colorado. Key aspects of this authority include:
- Allowing CDOT to partner with private entities for highway projects.
- Enabling flexible financing models, including user fees or tolls, to fund projects.
- Providing for the transfer of risks and responsibilities between the public and private sectors, depending on terms of an agreement.
- Under section 43-4-806, the Colorado High-Performance Transportation Enterprise (HPTE), now known as the Colorado Transportation Investment Office (CTIO), is tasked with facilitating and managing PPPs for transportation projects. CTIO is authorized to enter into PPP agreements for the construction, financing, and operation of toll roads, express lanes, and other transportation infrastructure, and to engage in long-term contracts with private entities to optimize public value.
- Section 29-4-710 provides for public-private partnerships for affordable housing projects, allowing local governments to engage in PPPs to develop, finance, and manage housing projects. The statute also encourages the use of innovative financing models to meet local housing needs.
- Colorado’s Public-Private Partnership (P3) Act, section 24-94-101 et seq., enables local governments and state agencies to enter into PPP contracts for a wide range of public infrastructure projects, beyond just transportation, including water treatment plants, schools, and other public facilities. The law permits state public entities, including the executive, legislative and judicial branches of the state government, to enter into agreements with private companies to develop and/or operate public projects.
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