A single construction dispute can turn a profitable job into a loss; multiple ones can put a contractor out of business. This article describes seven strategies for avoiding them, including careful drafting of contracts, adhering to accurate scheduling and considering alternative delivery approaches.
A single
construction dispute can turn a profitable job into a loss; multiple ones can
put a contractor out of business. Here are seven strategies for avoiding them:
Draft
contracts carefully. Ambiguous contract language is probably the most
common cause of legal wrangles for contractors. Pay close attention to
provisions that affect your right to compensation and/or extensions of time in
the event of owner-caused delays or changes. These include change order
provisions, no damages for delay clauses, differing site condition provisions
and substantial completion requirements.
Monitor
jobs closely. No matter how well drafted your contracts, disputes can
still arise if your project managers and crews don’t follow contractually
mandated procedures. For example, be sure they understand the change order
approval process and follow it to the letter. This means complying with all
notice and approval requirements and documenting additional costs thoroughly.
Have
an accurate schedule. It’s difficult, if not impossible, to assess the
impact of delay claims or change orders without an accurate baseline schedule
accepted by all parties at the start of the project. A solid schedule also
serves as a tool for identifying delays early and taking steps to prevent or
minimize them before they lead to potential disputes. If you regularly find
yourself falling behind on job progress, look into refined scheduling methods
and technology to shore up this problem.
Stay
up to speed with applicable laws and regulations. Keep up with laws and
regulations that affect your types of projects. If you work on public jobs, for
instance, federal or state rules may require certain mandatory contract clauses
— and courts may interpret
the contract as containing these clauses even if they’re omitted. Failure to
comply with these rules is an invitation to disputes or litigation.
Train
project managers. By the time a construction company owner learns of a
dispute, it’s often too late to prevent dire consequences. Project managers are
typically in the best position to spot potential difficulties as they arise.
Train yours to identify troublesome issues and act quickly to resolve them.
Doing so can often mitigate problems before they turn into full-fledged
conflicts.
Consider
alternative project delivery methods. New approaches, such as
integrated project delivery (IPD), can help reduce disputes. In IPD,
contractors, owners and architects (and even major subcontractors and
suppliers) enter into a mutual contract. Doing so helps avoid disputes because
the parties collaborate from the beginning — agreeing on goals; target costs; and allocation of
responsibilities, risks and compensation. Often, they waive liability claims
against one another (except for willful misconduct) and make decisions by
unanimous consent, subject to arbitration or another alternative dispute
resolution mechanism.
Take
advantage of technology. Evolving technologies that enhance collaboration
and information sharing can help reduce disputes. Take building information
modeling (BIM). This technology creates 3-D or even 4-D models that enable the
parties to view the completed project from different angles to better
understand the spatial relationships between building components. It also helps
job contributors see how changes in design or materials affect the project.
Notably, by helping the parties identify and resolve design conflicts before
construction begins, BIM can be an effective dispute-avoidance tool.