Mastering MSAs

• Author: By Eric A. Berg, Wendy F. Klein Keane, and Kevin R. Garrison
• Pages: 28-50

Published in The Construction Lawyer Volume 43, Number 1, ©2024 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction Law The Construction Lawyer Volume 43, Number 1

28

Mastering MSAs

By Eric A. Berg, Wendy F. Klein Keane, and Kevin R. Garrison

Eric A. Berg is a partner in Barnes & Thornburg LLP’s Chicago office, where he focuses his practice on

litigation and transactional construction law. As a member of Cozen O’Connor (Philadelphia office),

Wendy F. Klein Keane is a construction lawyer who represents clients in all phases of the construction and

dispute resolution process. Kevin R. Garrison is a shareholder in Baker Donelson’s Birmingham office,

and he advises clients on all aspects of construction disputes.

Master service agreements (MSA) can appear in every aspect of construction contracting. They may be

referred to as MSA, on-call, task order, delivery order, or IDIQ contracts, but no matter what the name,

these efficient contracting tools provide consistency and rapid project delivery across a variety of different

(or similar) construction projects. MSAs are a tool that every contractor and construction attorney should

be utilizing in their practice when appropriate.

Overview: What Is an MSA?1

Many owners and general contractors work with the same contractors, subcontractors, and trades,

project after project. Although many general contractors will readily admit that they live and die by

their subcontractors, at the end of the day they still have a large degree of bargaining power over their

subcontractors. It goes without saying that owners typically have even more bargaining power over their

contractors (although this can vary with the market and region).

Given these well-entrenched business relationships,2 several factors become key in the allocation of

risk via contract, through drafting, negotiating, pricing, letting out to bid, award, and execution. Scope,

schedule, and budget are the variable factors; everything else, for the sake of consistency, predictability,

efficiency, and fairness, can and should (for the most part) stay the same from project to project.

Subcontractors appreciate a known quantity in dealing with their customers; shouldn’t the parties create a

contractual framework that establishes that known quantity and thereby achieves the goals of consistency,

predictability, fairness, etc.?

MSAs therefore work in two parts: the terms and conditions that constitute the “master” portion of the

agreement and then a triggering work order/purchase order/initiating document (generically referred to as

a “work order” in this paper) that ties the MSA to a particular project and its variables: typically, scope,

schedule, and budget.

In order to complete this union, the work order must reference the MSA executed between the parties and

then identify the variable factors (project name, work order date, parties, scope, schedule, and budget)

and the other project-specific or special documents (contingent on approval by owner/prime contractor).

Project-particular contract documents typically include:

1. the MSA itself and all documents referenced in the MSA;

2. the work order and all documents referenced in it;

3. any drawings, specications, manuals, supplements, schedules, addenda, bulletins, RFI responses, or

other documents identied in the applicable work order;

Published in The Construction Lawyer Volume 43, Number 1, ©2024 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction Law The Construction Lawyer Volume 43, Number 1

29

4. any modications to the MSA or the work order;

5. the prime contract—including any general, supplementary or other conditions thereto—between the

owner or any other prime entity and the contractor (the Prime Contract); and

6. other documents referenced in the Prime Contract and any modications thereto.

With the MSA framework set in concrete, and with the work order project requirements coupled to it, the

agreement will be an enforceable document—offer, acceptance, and consideration—to the extent intended

by the parties.3 Because the MSA has already been negotiated, drafted, and agreed to, it can be easily and

efficiently be invoked by the work order, and the parties are on their way.

This ease of creating an enforceable contract between parties sharing a longstanding (or they hope

longstanding) relationship is not without hazards. An MSA should include a clear statement that, although

executed by both parties in apparent anticipation of future projects, it is no guarantee of future work.

Each discrete project can and should be effectuated only by a written, complete, executed work order

or other project-specific document, clearly identifying the scope of work for that particular project and

incorporating the MSA by name.

As a further protection in this regard, the parties may opt to pin the MSA to a specific length of time and

state that the MSA’s term is automatically renewed unless cancelled by a party within a certain period of

time before the end of the term (much like many leases). One potential drawback of a nonrenewing MSA

is that the parties may be tempted to crack it open annually and renegotiate terms, thereby defeating one

of the primary purposes of having an MSA.

Because of all the different moving parts—the MSA, the work order, the contract documents, the flow-

down of the Prime Contract—the MSA should include an order of precedence. Typically, the underlying

work order (which tends to be more specific) should govern in the event of a conflict, followed by the

MSA. Again, if the goal of the exercise is efficiency and consistency, setting up the MSA to trump all other

potentially conflicting documents (except the work order) can ensure that goal is met.

Key Provisions of MSAs

Project Schedule

Like any (good) agreement, an MSA must contain provisions regarding the schedule. After all, time

is money. Typically, the MSA will contain key provisions like “time is of the essence” and then will

specically hold that the contracting party must start work promptly after being notied to do so and

carry the work forward to full completion, to meet the agreed-upon schedule in the work order(s) for the

particular project(s). It is recommended that the schedule for the project covered by the work order be

attached as an exhibit at the time of execution of the work order, or at some future time once the schedule

is agreed upon. The MSA may also generally obligate a party to complete the work in accordance with the

overall master schedule for the project, as such schedule may be changed from time to time.

Because the needs of any particular project may change over time, even if a party is not in default or has

not otherwise fallen behind the project schedule, it is also important to include language in the MSA that

permits a party to require the other party to work overtime and/or accelerate its work in order to expedite

completion of the project. It is also important to consider including provisions providing for how such

overtime or acceleration will be paid for (i.e., actual excess cost of the labor over the regular time rate, or

some other agreed-to rate). Of course, provisions should also be included to provide the upstream party

(i.e., owner or contractor) with the right to order the downstream party (i.e., contractor, subcontractor,

or design professional) to work overtime and/or accelerate its work if it has failed to keep the project on