Master Service Agreement in Construction: How It Can Benefit Your Business
You want to avoid conflict as much as possible with clients.
A Master Service Agreement does just that — it allows both parties to agree on terms and problem-solving strategies before conflict arises.
But how do you know if you need one?
This guide for your construction business answers the ...
- What
- When; and
- Why
… of Master Service Agreements for construction.
Every construction project involves a lot of details. When your work requires a Master Service Agreement, you want to be sure all your bases are covered.
Wouldn’t it be amazing if there was a way to easily store these important client documents?
Flexbase can help you not only store important documents, but the app can also help with any expense and cash flow needs.
In addition to storing your documents, Flexbase makes construction administration easier by:
- Managing your cash flow
- Sending invoices
- Generating compliance documents
- Accessing working capital
- Sending payment reminders and legal notices
- Tracking expenses
- And more
Flexbase has everything you need to successfully run your construction business — and it’s all in one place and is easy to use.
What Is a Master Agreement in Construction?
A master service agreement (MSA) sets terms between two parties — a contractor and a client. The parties agree to most of the terms that will govern all future construction work and agreements.
This construction agreement also establishes protocol regarding things such as:
- Major points of interest
- Expectations; and
- How conflicts will be handled
What Is the Purpose of a Master Service Agreement?
The purpose of a master service agreement is to make the contract process faster.
With an MSA in place, the contractor can react to a customer’s needs quickly, order parts without delay, and begin work right away.
What Are the Goals of a Master Service Agreement in Construction?
By clearly outlining the responsibilities of each company and what the companies will accomplish together, both parties enter the agreement understanding the expectations of each side.
This allows each party to honor their side of the agreement and helps to avoid any potential issues.
The goals of a Master Service Agreement in construction is to spell out:
- Confidentiality
- No secrets shared with outside parties
- Delivery requirements
- Who will deliver what and when
- Dispute resolution
- How conflict will be resolved
- How to handle ownership and regulation of all patents and other IPs
- Geographic locations
- Location of where employees will do the job
- Limitations of liability
- Who the responsible party is in the event of a lawsuit
- Payment terms
- What the estimated cost is and the schedule for payment
- Warranties
- The scope and the coverage of the warranty
- Venue of law
- The place where a legal resolution will occur
- Work standards
- What each party regards as acceptable work
What Types of Construction Businesses Should Use a Master Service Agreement?
Master Service agreements allow contractors to quickly get to work on a project.
MSAs can cover a variety of potential projects, and are ideal for:
- Those prone to emergencies
- Convenience stores, banks, and other multi-location retail stores
- Malls or other multi-tenant shopping centers
- Hospitality, senior living, or multi-family housing facilities
- Distribution centers that incur frequent repair and updating needs
How Can a Master Service Agreement Benefit a Construction Company?
For a construction company, a master service agreement governs all future transactions and helps parties to:
- Move more quickly through future agreements
- Mediate any potential conflicts
- Determine payment terms; and
- Outline liabilities
Advantages of Using a Construction Master Service Agreement
Creating a contract is often a lengthy and expensive process.
A Master Service Agreement allows both parties to come to a quicker deal, agreeing to the main points.
It’s possible to complete an MSA in a few weeks (or even a few days), which is significantly faster than most contract negotiations.
A Master Service Agreement puts an agreement in place for both parties.
If a dispute happens, the agreement will decide who’s at fault. It’s easy to check an MSA for what was previously agreed upon. This makes the two parties less likely to bring a dispute to court — saving money and time.
Once you’ve created a Master Service Agreement, it’s easy to use it as a template for all future negotiations. Each deal has its specifications, but you’ll have a blueprint that allows parties to focus on important details of the terms.
Once a company goes through the MSA negotiation process, it will understand what kind of concerns or issues may come up. The company will know what the problems are for the future and be able to address them quickly when it drafts the next MSA.
What Are the Key Components of a Master Service Agreement?
Key components of a Master Service Agreement (MSA) can include sections and services such as:
- Limitations of liability
- Scope of work
- Contract termination protocol
- Confidentiality or non-compete agreements
To help determine these components, it’s helpful to discuss these questions:
- What will your company do?
- What will the other company do?
- What will both parties do together?
- What are the responsible issues either party might face?
Limitations of Liability
The Master Service Agreement normally contains provisions limiting the liability of the service provider — and in some cases, the liability of the customer.
The MSA can contain a limitation on:
- Damages provision
- Attempts to exclude the recovery of damages other than direct damages
- Liability provision
- Attempts to put a monetary cap on the amount of damages that a party could be liable for
Both of these limitations vary widely and are often negotiated heavily.
Scope of Work
The scope of work (SOW) can be separate or included in your Master Service Agreement. Construction details of your services and pricing are well-defined.
The SOW specifies how much your client is paying you for:
- Specified services
- Projects; and
- Hours
If you add or change your services or their scope, it’s the SOW document that should be changed and signed by both parties — rather than the whole Master Service Agreement.
Contract Termination Protocol
The contract termination component of the Master Service Agreement details the procedures through which either of the parties may end the contractual relationship.
This clause is important in deciding which party has to pay damages for breaking a contract.
There are two main termination types:
- Termination for convenience
- Occurs when a party wants to exit the contractual relationship for no specific reason
- Termination for cause
- Occurs when one party doesn’t perform the obligations agreed to in the contract
Confidentiality or Non-Compete Agreements
Nearly all Master Service Agreements contain a confidentiality provision. In this, both parties agree they won’t share any secrets of the company with outside parties.
The provisions are typically provided along with data protection and data security provisions if certain types of information will be disclosed and processed as part of the working relationship. For example, personally identifiable information (PII).
Common Disputes That Arise With Master Service Agreements in Construction
Even with the most carefully written MSA, disputes may still arise. Being aware of the potential disputes will help you more easily handle them, should they come up.
The most common disputes that arise include:
- Communication issues
- If one party requests updates, but the other fails to respond promptly, it can lead to disputes.
- Injury or death of an employee
- Unless this is clearly addressed in your MSA, parties are likely to debate who holds the blame.
- Missed deadlines
- If one party misses deadlines, it can lead to issues between the two groups.
- Missed or delayed payments
- This is one of the fastest ways to create conflict between the two parties.
- Performance or service issues
- Conflict will likely arise if a product or service doesn’t meet one party’s expectations.
- Property damage
- This common source of dispute between parties should be addressed in your MSA as to what happens in the case of property damages.
The more you can plan for any potential conflicts in your Master Service Agreement, the less likely you’ll have conflict issues down in the future.
Use Flexbase for all invoicing needs of your MSA as well as for free storage of MSAs and other documents. Never have to worry about invoicing, cash flow, or being stuck with major disputes or issues when storing important documents within the Flexbase app.
In the construction industry, keeping your project on schedule is critical. A master service agreement helps to speed along the contract process and ensure that all parties are on the same page.
Enter Flexbase.
We have integrated all your construction documents (including your master service agreements and invoicing) into one easy-to-use free app.
In addition to storing all your construction documents and contracts, Flexbase also:
- Manages your cash flow
- Sends invoice and paperwork in minutes
- Gets you paid faster
- Now offers a construction credit card
A subscription to Flexbase gives you access to early payment incentives — and our friendly payment reminders mean that you can get paid up to 63% faster.
Schedule your demo today.
