Most of you have seen them - Construction Claims. Contractors want hundreds of thousands of dollars or even millions of dollars because of delays, acceleration, inefficiency, lost productivity, etc. Even the smaller claims can be time-consuming and hard on relationships. Ideally, a project should be completed without the need for any claims. While there are no guarantees, following the six steps below can increase your chances of reaching that ideal.

Step 1 - Realize the Buck Stops with You

At the outset, you as the public owner’s representative must realize that the buck stops with you, and that you need to take action at the beginning of your project to ensure that it will be successful. You are going to need a great team. By itself, a great team will go a long way to ensure your project is successful. But you need to do more than select your team and sit back and expect a successful result. You need to be an active owner, i.e., a leader who carefully and clearly communicates your expectations and objectives to each member of your team and then holds each member fully responsible for meeting your expectations and objectives.

Although Larry Bossidy’s and Ram Charan’s book, Execution, the Discipline of Getting Things Done (2002), is not specific to the construction process or even the construction industry, I recommend that you read or listen to the CD version of this book. It is one of the leading business books of the past several years. Bossidy was the Vice Chairman of General Electric and then the Chairman of Allied Signal. He and Charan, a management consultant, discuss how an effective leader gets things done. If you read the book, you will find out that an effective leader is an active and involved leader. On your project you need to be an active and involved leader, continuously communicating your expectations and objectives and then seeing that your team members perform. You want to build a team of successful, committed and engaged professionals. You want everyone on the same page, committed to meeting your objectives and expectations. You cannot do this in a one-hour meeting. It is an ongoing process that begins when you recruit and hire your team members.

Step 2 - Hire Successful Experience

There is no substitute for successful experience. You want team members who have been there, done that, and done that successfully. You must look beyond the sales people and at the professionals who will be your team leaders and their assistants. The people you are interviewing are the people who will determine the success or failure of your project. These are people on whom you will depend and with whom you will be working for several years. Take an afternoon and let the candidates explain in detail their experience, their approach to quality documents, how they plan for success, and how they handle problems. Get to know them. Investing this time at the front end of your project will pay dividends later.

You want a team of construction professionals who are not simply reactive, but who will think ahead and avoid problems, and, if problems do occur, have the excellent people skills to deal with those problems.

Ask the candidates to explain how they would approach your project. For projects on which you are going to have a construction manager to maximize cooperation and minimize friction between the design professional and construction manager, consider having the top candidates meet with you and explain how they would work together. Include in the hiring criteria a provision that you will consider the ability of the candidates to work together as a team.

Step 3 - Allow Enough Time for the Project’s Design and Construction

Many construction claims are time-related. To avoid a time crunch, allow a sufficient amount of time for the design and construction of your project with a reasonable contingency for problems. To determine what is a sufficient amount of time, compare your project to similar projects. Ask candidates who submit proposals about their past experiences and about the estimated time they will need for your project. Be sure that you add a time contingency for problems. You could have an extremely wet spring, a wall could blow down, etc. Assuming there is a legitimate delay, you are either going to extend the time or pay contractors to accelerate their work. Give yourself the option to accept a legitimate delay by allowing a reasonable time contingency for problems.

As part of your consideration of what is enough time, get a clear understanding from your design professional and construction manager about what will be expected of you. What decisions will you have to make? What will be the decision making process? Have them give you a proposed timeline so that you know well in advance what action you must take.

You want to get a clear commitment from each of your team members about the amount of time for the design and construction of your project, that the contingency for problems is reasonable, and that they have the resources and are committed to meeting the required timeline. These commitments represent your plan, your expectations. You need to go further and aggressively monitor the performance of each of your team members, attacking problems right away. Replace anyone who is not performing or is disruptive, and make sure your contracts give you the right to do so.

Step 4 - Provide the Process and Time for Excellent Construction Documents

In addition to adequate time, you need a process that will produce excellent contract documents with a minimum of errors and omissions. As you interview and hire candidates, explore with them their approach to high quality contract documents. Ask about their quality control procedures. If they have a written procedure, get a copy and review it. If you are going to work with a construction manager, ask your design professional how he or she would use the construction manger in the design process. As well, ask your construction manager candidates how they would propose to work with your design professional to produce excellent contract documents.

Once your highest ranked candidates have laid out a good quality control procedure for the production of excellent contract documents, make those procedures part of your design professional’s contract and, if you are using a construction manager, your construction manager’s contract. Those procedures are your plan for producing excellent contract documents with minimal errors and omissions. Once the contracts are signed, monitor your plan and see that your team members live up to their commitments.

Step 5 - Hire Only Good Contractors

You want only good contractors on your project. Owners have discretion in hiring contractors. Owners do not have to hire and should not hire contractors with track records of poor performance or unsubstantiated or overstated claims. The law fully supports a public owner’s discretion to reject bids from poor contractors.

To hire good contractors, establish the hiring of good contractors as a core value for your project. Communicate your expectations about this core value early and often. Make it clear to all design professional and construction manager candidates that this is a core value. During the hiring process, get their ideas about how they would assist you in meeting your expectations. How do they propose to review bidders’ qualifications? What provisions do they suggest you include in your bidding documents to ensure that bidders are aware of your expectations?

Your bidding documents need to be consistent with your core value of only hiring good contractors. State those expectations clearly and communicate them at your pre-bid meetings. Consider including language similar to the following in your instructions to bidders:

Important Notice: The Project is a signature project for _____________, and construction of the highest quality facility is vitally important to the community. In this respect, each contractor assumes a position of trust and confidence in the performance of its duties to the ______________, and shall perform its Work on the Project with the highest degree of competence, diligence, coordination and workmanship.

Take this language and repeat it right above where each bidder signs its bid and its contract, so there is absolutely no question that each bidder has agreed to meet your expectations. Build quality into your contract documents, including your specifications. For example, if you want a high quality metal roof that does not leak, (1) require that the contractor have the manufacturer’s technical representative on site during construction of the roof, (2) require that the roofing subcontractor have significant experience in installing metal roofs, and (3) require that the contractor give you a weatherproof performance warranty in addition to the manufacturer’s warranty.

Your bidding and contract documents define your expectations. Make sure your expectations are clearly communicated to all team members and prospective team members. Then during construction, make sure they meet those expectations. At each job meeting, engage your team and ask them what they suggest be done and what they are doing so the work on your project is constructed with the highest degree of competence, diligence, coordination and workmanship.

Step 6 - Have Contracts and General Conditions that Protect You from Construction Risks

There are few risks or situations that an owner creates or for which an owner has original responsibility. For example, if the owner buys a construction site with a bad soil, that is a risk for which the owner has original responsibility. If the owner does not get proper zoning for its site and that delays construction, that is a risk it creates. On the other hand, if the plans contain errors and omissions, the design professional is guilty of those errors and omissions. And, if a contractor does not have skilled workers and the roof leaks, that is the contractor’s responsibility.

Your contracts and general conditions need to protect you from those risks and situations you do not create or for which you do not have original responsibility, including the legal fees and expenses associated with those risks. You need not accept a “canned” contract or general conditions document. These can and should be tailored for you and your project. Specifically and without limitation, your contract documents should include several built-in protections:

• Indemnification clauses,

• Default provisions that provide for attorneys’ and consultants’ fees and expenses,

• Broad insurance coverage with you and your employees named as additional insureds,

• A dispute resolution procedure that permits the joinder of all potentially responsible parties in the same action,

• Final and binding decisions by the design professional in certain situations where the design professional is in a good position to make those decisions, e.g., clean up expenses, and

• A contractual prohibition against a contractor knowingly filing a false or fraudulent claim.

Having obtained good contracts, you need to understand them and make sure that each of your team members understands them and how the contracts allocate the risks among the parties. Meet with your attorney and go over your contracts in detail. Have your design professional and construction manager present at that meeting. Go into detail about the risk-shifting clauses, and make sure each team member has a clear understanding about how they work. Go through common problems that typically come up on construction projects and how your contract deals with these problems. Be prepared, and have your team members prepared.

Conclusion

Construction projects are difficult, complex, and often subject to costly disputes. The stories you have heard about leaking roofs, HVAC systems that do not work, cost overruns, contractors’ claims into the millions of dollars, and legal fees into the hundreds of thousands of dollars are true. By investing additional time and a little more money at the beginning of your project, you can avoid most of these problems and construct your project on time, on budget, and with minimal problems.

Reprinted from Finley’s Ohio Municipal Service, with the permission of the publisher and copyright owner, West Group.