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School Construction 2006

August 31, 2006

Careful builders can avoid contract disputes

  • Facing delays? Be up front with schools about scheduling, notice requirements
    Ferring Nelson LLP



    School construction projects are no different from other jobs in that both the contractor and the owner are better off if claims are minimized and disputes can be avoided. And like in other contracting, both parties can take steps to avoid claims and disputes before the contract is awarded.

    One rather obvious example is that contractors should make sure their bidding procedures include adequate site visits. In addition to obtaining important information about the work area, the contract documents require and presume the contractor has inspected the site.

    Contractors should also raise any questions regarding conflicts, errors or omissions in the plans or specifications before the bid opening. Careful review of the general conditions is also important because they establish many of the key elements of the contractor’s rights and responsibilities, and they are not the same in all school construction contracts.

    The school district’s role in claims and dispute avoidance also begins before the contract is awarded. The district or its consultants prepare the contract documents, and contracts that include quality plans and specifications are less likely to result in claims and disputes. Owners can also minimize problems by ensuring that their general conditions are fair and that the scheduling requirements are realistic.

    In addition to these typical elements of construction contracting, there are aspects of school construction that have a higher than normal potential for being a source of problems. They fall into the categories of schedule-related issues and notice requirements.

    Scheduling and delays

    Careful scheduling and timely performance are important in all construction projects, but particularly in school construction.

    Scheduling can be a source of problems for two reasons. One is that the contract completion date is sometimes based more on the school’s schedule than on the time realistically required to perform the work. The other is that districts often believe they have little or no flexibility to grant additional time to contractors, even if the contractor is entitled under the contract to the additional time.

    Under the terms of the contract, additional work required by change orders, specification errors, or certain delays give the contractor the right to additional time and money. However, often the district refuses to grant additional time because of the need for the project to be complete in time for the start of school.

    The situation can create an acceleration that occurs when the contractor is required to accomplish the work in less time than is contractually due. If the contractor is accelerated, costs generally increase because of actions that have to be taken to meet the unchanged completion date, such as working overtime, weekends or double shifts.

    If accelerated, the contractor should be sure to have the district confirm that no time extension will be granted and should tell the district that its refusal to grant additional time will result in acceleration. The contractor should track the additional costs incurred because of the acceleration, and submit the backup data to substantiate its right to a change order for the acceleration costs.

    Notice and follow-up

    Most school construction contracts have extensive notice requirements regarding situations where the contractor encounters changes, delays and extra work.

    Often the contracts state that the contractor’s failure to follow those notice requirements will constitute a waiver of the contractor’s rights to additional time or money. The contracts also typically require the contractor to provide detailed follow-up information in addition to the original notice.

    These requirements can be a problem area because often the time periods are very short and much of the information is unknown or unavailable.

    Contractors often believe the requirements are burdensome and unnecessary. Nonetheless, they should provide as much of the information as possible, tell the owner what information cannot be provided, and that they will provide that information when it is available.

    Many districts will work with contractors in such a situation. Some districts will take the narrow approach and deny the contractor’s request based on the contractor’s failure to strictly follow the notice and follow-up requirements.

    In recent years there has been much controversy and confusion revolving around these contractual notice requirements and the owner’s rights to deny claims based strictly on failure or perceived failure to follow the requirements.

    Recent case law suggests that the owner’s rights to deny claims based solely on notice failures may be in question. Contractors should understand the requirements, follow them as best they can, and seek early guidance from their attorney when these issues arise.

    Use common sense

    While awareness of these contractual and legal issues is important, common sense and practicality are always important elements when dealing with problems.

    Contractors should be aware of the tight scheduling requirements when bidding, and initial project meetings should include a detailed schedule review so that any potential problems or timing requirements can be discussed and addressed.

    Contractors should also tell the owner about problems and potential delays even if the full extent cannot be determined at the time. District representatives stress that they want timely notice of problems so that they have an opportunity to respond.

    Some owners have indicated that the failure to provide backup to support claims and change orders is the reason that the change orders aren’t processed. To receive a time extension and costs that result from a delay, it is important that contractors fully document the costs and show the owners how they have attempted to avoid or mitigate the delays.

    Finally, whether the contract requires it or not, if the contractor believes that the district or its representatives are creating problems that are impacting the job, the contractor should tell them about the problems.

    Michael Ferring is a partner at Ferring Nelson LLP, where he represents general contractors and subcontractors on construction-related issues.

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