During my career, I’ve learned a lot about things that are not exactly estimating but are closely related. For instance, I had to learn about relationship management with vendors and customers. I was required to learn enough about electrical engineering to finish the incomplete plans we often get. I also have learned about the National Electrical Code as needed to ensure the plans could be executed in the field. (How often have you had to inform the owner that the switchgear will not fit in the allocated space?) However, I had not considered how much I learned about construction law. It just sort of happened over time. I learned from the seminars I attended, from being burned by laws I wasn’t aware of, and even from the lawyers I have dealt with along the way.
It is important for estimators to know about the construction laws that affect their work. How much they need to know depends on what position they hold in a company.
An estimator who is only responsible for counting does not need to know a lot about construction law, but a small company owner, who is also the project manager and estimator, needs to know everything reasonably possible. Why do estimators need to know the law? Risk. Estimators are responsible for identifying the risks involved on every project they take on. The basic responsibility estimators have is establishing accurate material pricing and labor hours. Beyond that, someone has to assess the bid documents for other risks.
One company I worked for earlier in my career had clear-cut responsibilities in this area. My responsibilities included checking the contract for the change-order terms and the construction schedule, while my boss checked for other risks that were more related to construction law. The following are some examples of legal matters that someone involved with the estimate should know.
The estimate always seems to come to the fore in legal actions. The opposing side will likely want to review the estimate to see if they can find something that shows you are at fault. If your estimate is sloppy, incomplete or error-laden, your lawyer will have a hard time defending it. Also, your estimate needs to correlate to the schedule of values. If it does not, it is another avenue for the opposing lawyer to damage your claim.
Warranty clauses in contracts can be dangerous. Some of these phrases can make you warranty the design. Do you know the difference between patent and latent design flaws? A reasonable review of the documents will reveal patent defects, while latent defects are hidden. Many contracts make the electrical contractor responsible for patent flaws in the design documents.
Order of precedence is another area that can come back to haunt you. For most projects in my career, small-scale details took precedence over large-scale drawings. Some companies have now reversed that, with large-scale drawings taking precedence over small-scale details. This one minor change requires the electrical contractor to be responsible for making the installation work, no matter what the details show.
Another phrase that appears in some contracts and specifications makes the contractor responsible for reading and complying with a facility or building manual. These manuals often contain procedures that may require the contractor to do expensive things that are not indicated on the electrical drawings. I ran across one that required new short circuit and coordination studies every time you changed one circuit breaker in a switchboard. Other requirements, such as smoking or eating restrictions in the building, can seriously affect your labor calculations.
Here is a major problem with today’s specifications: vague language. On one of my projects, a phrase required an equipment ground wire in all conduits containing an isolated ground. The construction manager somehow interpreted the phrase as requiring an equipment ground wire in all conduits. The difference in interpretation turned into a loud conflict between the electrical contractor and the construction manager. The point I am making here is, if anything you read is not clear, send in a request for information during the bid, or qualify your interpretation in your bid proposal.
Finally, let me state it again: Do not sign a contract that a construction lawyer has not reviewed. Furthermore, when you get the review back from the lawyer, take the advice you paid for.
Electrical Contractor Legal columnist, Gerard Ittig, contributed to this article.