Owners Beware: Standard Construction Contracts Include Wallet-Draining Risks
Barry LePatner June 20, 2013, 6 a.m.
Corporate, commercial and institutional owners alike—even developers—all too often believe that if they have just one or two real estate projects under their belt, they fully understand how they are designed and built.
I urge them all to reconsider.
Every project has unique aspects that impact how they are designed and ultimately constructed, rendering each project, in effect, a ‘one-off.’ And in each case, they require the careful selection of important team members—including project-management professionals—who have demonstrated their experience in successfully delivering projects on time, on budget and at a high quality.
Unfortunately, many projects are sold to owners who either accept the terms “fast track” or “guaranteed maximum price (GMP)” or utilize contracts that are silent on the critical importance of fully complete and coordinated construction documents for bidding. Such projects all are but guaranteed to suffer from excessive change orders, delay claims, cost overruns and a construction schedule that will be extended for weeks, months or even years.
Want to verify this? Ask an architect, engineer or construction manager to describe the results of the last five projects he was involved in that were “fast tracked.” If construction started before the design was completed, did it finish on schedule? Or did the incomplete and uncoordinated design result in myriad RFIs and rework that increased costs and delayed final completion? Chances are, you won’t hear about happy owners whose investments were well protected.
And that realization should convince you to avoid “fast track” projects at all costs.
What is the solution, then?
You should insist on using a project delivery methodology that ensures that you obtain a fully complete and coordinated set of construction documents for bidding in order to secure a TruFixedPrice™ that will not allow contractor change orders unless you choose to add scope to the project. Following this prescription, you, as the owner, change the rules in today’s fragmented construction industry by (i) obtaining a TruFixedPrice™ instead of a nebulous GMP, (ii) recapturing control of actual construction costs and (iii) curtailing RFIs and change orders during construction, which invariably slow and delay progress.
Compare this formula with the status quo of your owner colleagues, who often find themselves mired with cost overruns, delays, mechanics’ lien claims and litigation stretching on well after project completion.
Construction is difficult even under the best circumstances. Rather than looking skyward and praying for the best outcome from “fast track” and GMP, take control of your next project with a TruFixedPrice™ solution that reflects your business goals and provides a recipe for success.