by  Don Owen

Donald Owen & Associates Inc.
Copyright © 1997  Donald Owen & Associates,  Inc. 

 

Owners of state and federal public works construction projects assume substantial risk during the construction phase of their projects.  Unforeseen site conditions, bad weather, defective plans and specifications, and contractor default,  are only some of the possible hazards that can adversely affect the cost of a project.  One of the greatest risks that owners face is the possibility of significant and costly construction disputes arising out of the performance of a construction contract.   Just as successful contractors learn to manage and minimize the risks they assume, owners too can manage and minimize the risk of construction disputes that jeopardize the success of their projects.

Most construction disputes can be prevented or avoided.   Owners often have much greater control over the factors that cause disputes than they realize.  The vast majority of disputes that end in costly litigation  would never have reached that point if effective action by the owner had been taken at the proper time.  Following are steps owners can take that will significantly reduce the possibility of construction disputes.

 

Perform a careful constructability review of the contract documents prior to the project going out for bid.  Not only should the plans and specifications be reviewed for mistakes; they should be reviewed for clarity and ease of use.

 

Do not delay the contractor.  Owner caused delay is probably the greatest source of construction disputes.  Owners seldom realize how expensive delay is and seldom go to the lengths they should, to avoid delaying a contractor.

 

Minimize the number of changes made to the project during construction.  Every change made to a construction project has an impact to that project.  The more changes you make, the more likely disputes will arise.

 

Do not try to get the contractor to pay for things that are outside of his responsibility.   When there are mistakes in the plans, or changes to the contract,  admit responsibility and pay the contractor a reasonable amount for the change.  Make every effort to settle changes before the work is performed.  If the work has already been performed, realize that you accepted the risk of performance because you didn’t settle the price of the change before the work was done.  In this case, pay the contractor based on his actual costs, plus a reasonable overhead and profit, not the amount someone who did not have to perform the work,  thinks it should have cost.

 

Deal with issues as they arise on the jobsite.  Owners who wait until the end of the job to deal with contractor claims related to changes, impacts, and delay, greatly increase the likelihood of disputes.  In order to effectively deal with issues as they arise,  the owner must have contract managers who are skilled in interpretation of  construction contract documents, and in the fair and careful evaluation of  contractor claims.  The owner’s contract managers should be diligent and responsive to the myriad issues that arise during a construction project, and be able to address issues based on the terms and conditions of the contract.  They should have strong communication skills, and possess that rarest of all abilities, the ability to listen to other people. 

 

These guidelines will not always prevent contractors from making unfounded claims, or performing poor quality work, or getting behind schedule.  What these guidelines will do is put owners in the position of being able to deal with jobsite problems quickly and effectively when they occur.  When the owner does need to insist that corrective action be taken by the contractor, there will be fewer collateral issues to muddy the waters and weaken the owners ability to be effective. The result will be fewer disputes.  Owners who fail to manage the elements of a project that they have the most control of, will not be able to manage the elements of a project the contractor has the most control of.

 

Owners who follow these guidelines will rarely find themselves in litigation, and when they do, they will probably prevail.  They will find that their projects finish on time more often, and they will find that they have better relationships with their contractors.  This will be reflected in the quality of their finished projects, and the ease at which warranty issues are dealt with.  As an added bonus, owners will also discover that more contractors are interested in bidding  their projects, and the bids they receive for their projects will be more competitive.   

 

Don Owen is a construction management consultant who lives in Indianola, Washington. 

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Phone:  360-297-3738   Fax: 1-888-436-6475    E mail:   donowen@centurytel.net