If it’s not in writing, it didn’t happen

If it’s not in writing, it didn’t happen

George Hedley

Are these the five truths of construction?

Every set of plans is perfect.

Every project is over budget.

Every project is too slow.

No change ordes are legitimate.

The contractor is always wrong.

No, but it often seems that way.

Nothing is perfect in the construction field. The contractor can have an absolutely legitimate claim, but must be able to prove it in order to collect. To ensure getting paid for extra work, document situations as soon as the problem becomes known, or at least within the maximum number of days allowed by the contract.

I have served as an arbitrator for the American Arbitration Association on a number of construction lawsuits. In most contract disputes I have evaluated, problems could have been avoided if the subcontractor had notified the general contractor or owner in a timely manner. The majority of problems occur when contractors seek money for extra work done weeks, or even months, after the fact without timely documentation to back up the request.

Consider these two examples of situations that need documentation.

1. A plumbing contractor installs underground sewer using plans that don’t give exact dimensions of the pipe’s location. The plumber has now accepted responsibility for poor plans by installing pipe in a wrong location. Proper documentation of this situation as it occurred, including specific references to the conflicts of omissions in the plans, puts this problem back on the project owner’s shoulders.

2. A contractor digs a footing, discovers an unforeseen condition, fixes it, and then several weeks later notifies the owner that he hit an underground structure, spent additional money remedying the problem, and expects to get paid for additional work. The owner does not have any contractual liability to pay for extra work performed, installed, of completed without proper notice, documentation, and authorization per the contract.

The contract specifies how many days you have to notify the owner upon discovery of a differing condition on a jobsite. Document it (including written proof and photos), show how you mitigated or intend to mitigate the damages, and submit a claim and change order within the number of days specified by the contract.

Some things never change

The realities of change orders in construction never change. These orders are not “extras,” but are additions, changes, and deletions from the contract’s scope of work. Somebody changed the scope of work, but not you. The project owner, architect, or engineer didn’t prepare proper or complete plans of specifications.

Never give work away. Your company has a fight to collect for additional work and extended time when somebody else changes or modifies the scope of work or schedule.

The typical scenario, however, goes like this: A subcontractor walks into the general contractor’s office with a list of change orders that occurred two, three, or four months prior and asks to get paid for extra work. You can quote me here: “If it’s news, you lose!”

Sometimes the general contractor or developer might be magnanimous and approve some of the money requested. However, by contract, no monies are owed. Once in court, some judges or juries might be soft-hearted, but don’t count on that point of view to win the case and get paid.

Types of changes

There are two types of change orders.

Wanted (requested changes)–those requested by the owner, architect, or builder, such as upgrades and additions.

Unwanted (constructive changes)–those caused by differing conditions, field problems, conflicts, poor plans and specifications, errors, and omissions.

Needless to say, changes that are unwanted or unexpected tend to make people unhappy. These changes present more problems for budgeting, scheduling, and payment. Make sure the project manager keeps a log of potential of proposed change orders, as well as those executed. Match each project’s monthly budget report to the executed change order log to ensure accurate committed costs, estimated final costs, and anticipated profit.

Review the general conditions, specifications, and general contract or subcontract on every project to look for the timeframe allowed to request additional monies and time extensions for change orders. These requirements may be different for owner-requested changes and constructive changes.

While you are required to give proper notice for change orders, the work typically proceeds while final negotiations ensue. Follow procedures established in the contract, and establish your own management procedures to track these incidents carefully and completely.

Train customers

Meet with customers at the beginning of every project and tell them exactly how you want to do business with them. Tell them up front–in advance–that you require signatures in order to proceed with extra work, expect them to abide by the terms of the contract, and stick to it. Play hardball and be firm, but fair. Customers will respect you and treat you professionally if you do likewise.

When you don’t require the customer to honor their contract and go ahead and do work without signatures, the customer won’t respect you and will take advantage of your weakness.

For information on Mr. Hedley’s programs or to receive his free management e-newsletter, visit www.hardhat presentations.com, call 800-851-8553, or e-mail him at gh@hardhatpresentations.com

COPYRIGHT 2004 Hanley-Wood, Inc.

COPYRIGHT 2004 Gale Group