Construction projects are riddled with risk. Differing site conditions, changes, delays, bad weather, potential cash flow problems, and claims, to name a few. Good construction contracts should help to reduce the risks of uncertainty by planning and predicting how to deal with problems.
Almost any problem on a construction project can be traced to one of two things: changes or delays (even delays are really just changes). As in life, embrace and manage the change don’t run from it.
For Contractors:
- Understand and apply the changes clause in your contract;
- Provide written notice;
- Keep working on unchanged work to mitigate delays (read more);
- Confirm your entitlement under the contract terms;
- Track and timely present your estimated and actual costs to the Owner; and
- Timely present a complete and well-reasoned story about the change to the Owner.
For Owners:
- Understand and follow the changes clause in your contract (you probably have obligations even if you disagree there is a change);
- Clearly communicate in writing your complete or partial (dis)agreement with a change; and
- Timely and reasonably review and consider claims or change proposals (you have more control during the Project than afterwards).
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
Are We There Yet?
Next time you close a deal, get the essential terms on paper and signed by all parties before it’s Miller Time.
Show Me the Money!
You told the guy to do the work, the work is done, and now it’s time for payment, right? But, you only told […]
