Preventive legal “medicine,” applied before project construction documents are executed, is the best precaution against a project’s becoming a cancerous disease. It is only before the commencement of a project’s contractual beginning that legal structures can be introduced confidently which, with experienced professional oversight, will reasonably assure that the project will be completed timely, on budget, and at the quality objective. The contractual legal safeguards designed for the achievement of these objectives are conventional, recognized in the sophisticated construction industry and respectful of the fair interests of the owner and contractor. Unfortunately, when they are not part of the organized contract documents, the contract parties are exposed to punishing unfairness:
- The contract may be harmfully “front-loaded;” i.e., moneys may be demanded and often paid far ahead of the accomplished work;
- Money is demanded for work that may be out of Code, or outside of workmanlike standards. Code inspections, under law, are not performed for an owner;
- Money may be refused for necessary work performed outside of the contract scope without prior agreement as to value of time; and
- Work progress on the job is scuttled by substandard mobilization.
The construction environment is blessed with numerous architects and engineers who have immediate and realistic market experience in the cost of construction, and many legitimate contractors whose contract documents responsibly balance the compatible objectives of an owner and contractor. Unfortunately, however, it is unrealistic to assume that mother nature will save an owner from project disease which can be traced directly to deficient contract documents, weak contract administration, or the absence of a sensible post-contract effort to “center the wheel.”
Even though inadequate contract documents have been executed, it is never too late to “take the temperature and x-ray” of the project as the first step in an effort to ensure a mutually healthy contractual relationship. Ground rules for all contract parties:
- Sooner is always better than later;
- Project paralysis does not wait for a formal invitation (i.e. conflict, impasse, ambiguity, blurred objectives);
- Smart, experienced respectfulness is the starting point. Contract party ego, a latent volcanic force, can be mobilized constructively; and
- Wherever possible, the strategy of avoidance beats conflict resolution by a thousand miles.
Remember, all charm and razzle dazzle aside, an owner and contractor are buyer and seller with potential and inherent conflicting objectives.
There are numerous essential elements in smart contract documents, particularly where the contract values present a serious risk for the respective parties and there is a need for balanced assurance and control. While a comprehensive overview of necessary contract provisions is beyond the scope of this article, a smart general contract between an owner and contractor must contain provisions which address:
- Start and Completion;
- Progress Scheduling having sequential logic;
- Payment Structure;
- Clear scope of work;
- Identification of Trade Subcontractors;
- Permitting Responsibility;
- Competent Identification of design professional qualification where material elements in the contract are structural, mechanical or hydrological; and
- Criteria for Completion time extension.
Where a review of your costly and important project reveals any of the foregoing “bones” to be missing, you are encouraged to do everything possible to smarten up the project before distracting and expensive conflict replaces success. There is no downside risk to a useful effort.