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September 3, 2025 Article

Updates to ConsensusDocs 500 Agreement: Legal and Risk Management Highlights

ConsensusDocs recently published updates to the ConsensusDocs 500 Standard Agreement Between Owner and Construction Manager At-Risk (CMAR). The ConsensusDocs 500 Series are commonly used on projects using the CMAR delivery method—where the Construction Manager is engaged early and assumes the risk of performance for delivering the project within a Guaranteed Maximum Price. Click here for a link to the ConsensusDocs website for more information.

Key 2025 Updates to ConsensusDocs 500:

Limits on Waiver of Consequential Damages

  • Update: Clarifies that an insurance payment is still required for a waiver of consequential damages to be valid, not just insurance coverage itself. 
  • Takeaway: Carefully review insurance coverage and limit over-reliance on waivers for protection. Best practice is to clarify when and how damages may be recouped and ensure sufficient policy limits are in place for potential covered losses.

Shared Savings Provisions

  • Update: Adds a shared savings clause to promote collaboration and cost efficiency. Includes the ability to define how savings are calculated, allocated, and whether they apply before or after contingency funds are exhausted.
  • Takeaway: Poorly written clauses could lead to disputes over entitlement or manipulation of cost reporting. use clear math, thresholds, and timing provisions.

Builder's Risk Insurance Default Allocation

  • Update: Removes the requirement to purchase a Builder's Risk policy to cover existing structures. The responsibility for obtaining this insurance now defaults to the constructor. Additionally, coverage for existing structures is no longer included by default and must be affirmatively negotiated. 
  • Takeaway: Construction Managers must price and procure appropriate coverage. If the project involves renovations or work on existing buildings, parties must specifically address risk of damage to the existing structure. Failing to do so can result in uninsured losses and potential liability exposure.

Clarification of Risk of Loss Provisions

  • Update: The risk of loss now transfers to the constructor a the point of Substantial Completion, rather than Final Completion.
  • Takeaway: Align insurance coverage with risk transfer language in the contract and verify policy language includes these coverages to avoid gaps and disputes over who bears the loss.

Delegated Design Clarification

  • Update: More detailed procedures for submission, review and response processes related to delegated design, establishing clear responsibilities for the owner, design professional, and constructor. Also confirms that the CMAR must coordinate–but is not liable for–design errors unless negligent in coordination or procurement.
  • Takeaway: Helps prevent overextension of CMAR liability for design services and avoids confusion over who is legally responsible for design, particularly in the context of performance-based criteria.

Other updates include: clarification on interim directives; the addition of a statute of repose in addition to the statute of limitations as reasons for barring commencing arbitration; the addition of a three-year period or longer as required by applicable law to retain records; an added definition of contingency and clarification that contingency is part of the GMP; the creation of a duty to defend as part of the indemnity obligation to hold the owner harmless for hazardous materials brought to the site by the Constructor or someone for which the Constructor is liable; additional guidance regarding supporting materials and the process regarding rejection of payment applications; and clarification that the Constructors’ warranty obligations to correct material and equivalent defects for owner-provided materials and equipment are limited to installation defects.

Risk Management Takeaways

Understanding and implementing the changes above will go a long way to help minimize the risk of legal disputes, eliminate coverage gaps, and promote stronger partnerships across your project delivery team. By using the ConsensusDoc 500 Series updates, CMAR users can modernize contract templates, streamline administration, and minimize the risk of disputes.