Building schools involves some unique parameters. The budget is often inflexible, the completion date and interim milestones are based on school semesters, and project management may be left to the architect, who has built-in conflicts regarding errors and omissions in the drawings.
How disputes arise
Some examples, with questions:
1. A four-story, L-shaped dormitory. After contract award, the owner’s construction manager decides to treat the two wings as separate projects. The contractor does not object. Do you know where the major problem lies?
2. During expansion of a university hall, it is discovered that the board-room electronics were not detailed in the drawings. The contractor asks for a 20-day extension to its schedule, believing that’s how long it will take to complete the job. Is it possible for the contractor to have a legitimate claim for delay of 60 days?
3. A college’s building project is already delayed. To obtain some use of the building as soon as possible, the administration identifies certain sections as more important for early completion. The work is put in a new sequence. Why will there be a claim by the contractor?
How did you do? Here are my answers:
1. Whether a building is straight or L-shaped, the contractor will have planned its crews to do repetitive tasks, floor by floor. The sequences are predictable. By dividing the building essentially in half, the contractor will now need two separate crews for each sequence and two superintendents, equipment and supplies will be dispersed, and there will be attendant delays and extra costs.
2. Twenty days may be adequate to install the new electronic work. However, additional time will be taken up with the change. Neither contractor nor owner accounted for the time lost waiting for the new drawing, purchasing the extra materials, or accommodating this added work into the schedule.
3. When the college decided certain building sections were more important for early completion, the change of sequence created stop-and-start work for the contractor. Rather than having the crews progress from room to room, the new approach will be disjointed, with time lost and a likely impact on labor productivity.
The owner’s defenses
The first line of defense for owners is typically the contract, most of which have multiple written “notice” clauses for such events as delays, extras and interferences. These clauses are designed to waive claims unless they are asserted within the time period, which usually varies from clause to clause.
On many projects, neither owner nor contractor is fully familiar with these provisions, including the notification periods. As a result, the contractor may unknowingly fail to comply with the clauses, which may be fatal to the contractor’s claims. Often, the clauses are ignored by owner and contractor, in which case they may be waived by the parties’ behavior.
Another defense is liquidated damages. In many instances, the “liquidated” (preagreed) damages are a dollar figure for each day of delay by the contractor. On highly specialized projects it is not unusual to find the delay damages calculated for minutes rather than days.
Liquidated damages for contractor delays are generally enforceable in court. However, many owners do not perform a delay analysis of the schedule to enable them to know who is responsible for the delays. If the owner caused delays or the owner’s delays are concurrent with the contractor’s, liquidated damages will be reduced or eliminated.
Arbitration or litigation
When all else fails, the parties sue. The American Institute of Architects standard-form contracts for contractors, construction managers and subcontractors all contain arbitration clauses, which, of course, can be deleted.
For schools, is it better to stand before judge and jury, or before trained construction arbitrators? Some considerations:
In recent years, more and more owners and contractors have been opting for mediation as a precondition to arbitration or litigation. Since 1997, AIA’s standard-form contracts have contained “mandatory” mediation clauses that require the parties to try to settle their disputes with a mediator before proceeding to arbitration or court. In addition, most courts now have their own mediation and arbitration programs.
Too often, the disputes-resolution clause in the contract, whether it be litigation, arbitration, mediation or some combination thereof, is overlooked when the parties are signing the contract. It is wiser to pay attention to how disputes will be resolved at the outset of contracting when the parties’ desire and ability to accommodate are the greatest.