Experience shows that the same types of problems arise time and again in highway and
underground construction work. This list of tips is not intended to be an exhaustive
catalog of potential problem areas, but it covers many of the more troublesome ones. These
recommendations illustrate the legal and practical steps which must be taken to deliver a
project on time and within budget, or to protect your position in claims or disputes.
NOTES
1. Bidding. Confirm cost estimates
before submitting bids to avoid busts. Do not build savings tied to proposed value
engineering or substitutions into the bid price unless you are reasonably certain they
will be approved. On major items, seek an addendum to plans and specifications or
clarification from the engineer before submitting a bid adjusted for value engineering.
2. Contract Review. Read contracts
carefully, or have your construction attorney do so, before signing them. Quite often,
burdensome or incorrect terms can be softened through negotiations. Subcontractors should
not fear that they will jeopardize their relationship with the prime contractor; remember
that it was a competitive price that earned you the job. At least a thorough contract
review will forewarn you of any major risks (Examples: liquidated damages, insurance
requirements, site restrictions, existing conditions).
3. Insurance and Indemnity. Have your
insurance agent review your contracts to make certain you have adequate coverage for the
project requirements. Understand the risks associated with contractual indemnities; if
they are not insured, they can bankrupt the company.
4. Scope of Work. Review your scope of
work and that of intersecting trades (Examples: sheet metal and HVAC; structural and
cold-formed metal framing; electrical and mechanical systems) to make certain you have
included all requirements in your bid price. Be alert for requirements which are detailed
in a different section of the plans and specifications, or in bid alternates.
5. Plan Review. Be alert for
improperly coordinated or poorly detailed plans and specifications; request clarification
or notify owner or A/E promptly of errors or omissions in plans. Most general conditions
make the contractor absorb any excess costs incurred due to errors or omissions which it
should have discovered through a plan review or site inspection.
6. Existing Conditions. Allow for the
impact of concealed subsurface conditions on schedule and cost as best you can, and bear
in mind the risk of those conditions you could not anticipate. Most paving or underground
contracts for public owners make the contractor strictly responsible for protecting all
existing utilities -- whether or not Blue Stake marks them or they are shown on the plans
-- and many contracts prohibit the recovery of delay damages due to undisclosed
underground utilities.
7. Liens and Bonds. Protect your
rights to lien and bond claims at the front end of the project. Get information needed to
perfect lien or bond claims and send all required notices before work commences.
Use a competent lien notice service to send preliminary notices; the legal requirements
are too complicated to do it yourself. Subcontractors should exercise their rights under
prompt payment laws to request notification of the date on which the prime contractor
receives progress payments.
8. Mobilization.
Get all contracts and
subcontracts signed promptly after receiving notice of contract award and mobilize as soon
as possible. This minimizes the risk of bid protests or subcontractors reneging on bids.
9. Pass-Throughs. Subcontractors
should determine the full impact of pass-through or flow-down clauses which make them
responsible for the prime contractor's obligations to the owner (Examples: obligation to
furnish own power, liquidated damages, limitations on access). If your subcontract has a
pass-through or flow-down clause, then you have an obligation to review the prime contract
to determine the full scope of your obligations.
10. Weather Delays. Be realistic in
scheduling the project. Weather-related delays are excusable and compensable only to the
extent they were severe, unusual, and could not reasonably have been anticipated.
11. Extra Work. Identify and promptly
give notice of situations requiring extra work (i.e., work which is not within your
original scope but necessary to complete the project). Promptly estimate and segregate
costs of extra work and either get a signed change order or confirm in writing that you
are performing extra work at the direction of the owner or prime contractor.
12. Policies and Procedures. Develop a
system of form letters and procedures for documenting incidents and claims situations
(Examples: confirmation of directive to perform extra work; notice of delay or differing
site condition). Many valid claims are lost because the contractor did not give timely or
adequate notice as required by the contract documents. Train your field and office
personnel to record the information you will need, and give notices to the right people as
soon as they are needed.
13. Daily Reports. Require
superintendents or project managers to maintain regular diaries of job-site activities so
that claims situations, incidents involving delays and disruptions, and weather conditions
can be accurately tracked. Since these records are potential trial exhibits, train your
managers to be accurate, complete, and consistent. Leave out the editorial commentary.
14. Documentation. Invest in a good,
simple-to-use, camera (35 mm., instant, or video) to record claim conditions, incidents
involving personal injury or property damage, delay or hindrance by the owner or another
trade; conditions existing at time of OSHA inspection. It is cheap "insurance"
and it can dramatically simplify claims and disputes presentations.
15. Training. Utilize the resources
available to you for training your workforce and avoiding problems. Many agencies, such as
OSHA, provide consulting services or information to help contractors comply with legal
requirements. There is no threat of a penalty if a problem is found during the consulting
inspection. Community colleges, trade associations, and other business organizations also
provide training at a reasonable cost. The return on investment will be well worth the
expense.
16. Risk Avoidance. Talk to your
construction attorney before a problem reaches litigation. Often, a little
preventative work early in the job can avoid expensive litigation or claims later on.
Prepare for meetings with your construction attorney to make the most effective use of
those services. Your attorney can give better advice, faster, if all the relevant
information is made available at the first meeting. If you do not know what information
your attorney needs, ask for a checklist and then complete it.
17. Performance standards. Learn the
technical standards by which your performance will be measured; regardless of whether they
are job-specific performance standards, standard specifications (i.e., ADOT or MAG); or
national technical standards (AASHTO, ASTM, AISC, etc.) Quite often, you will discover
many standards that will help you support your position in claims situations. With regard
to materials testing and acceptance procedures for highways, a thorough understanding of
technical standards is crucial to successful performance. Your work will not be evaluated
for acceptance and payment until after you have expended all the labor, materials,
and time needed to deliver it in place.
18. Contract Completion. Whenever
possible, try to complete the project before tackling disputes with owners or contractors;
you will limit the potential defenses to payment demands and other claims if your work has
been completed and accepted.
19. Engineer's Role. Understand that
the project engineer is often the first, and the most important, person to educate and
persuade concerning the validity of a claim. Many contracts provide that the engineer's
decision to accept or reject claims is final and binding. If you cannot succeed at this
level, you will have a much more difficult time winning in an arbitration or litigation
later.
20. Dispute Resolution.
Consider using
alternative dispute resolution procedures (ADR) to resolve claims and disputes, even if
the contract documents do not require it. New ADR methods such as dispute resolution
boards, mediation, and summary mini-trials provide a wide variety of options in addition
to arbitration. The resulting savings to your company in terms of legal fees, management
time, and claim dollars can be substantial.