Chapter 20

Checkust for Successful Projects

Checklist for Successful Projects

Summary:

There are many secrets for successful projects. These rules include: write good contracts and keep good records; consider hiring a clerk of works; be honest and direct in the handling of all of your problems; select high-quality projects and insure for all major risks; train construction personnel well (they should all be familiar with basic claim requirements); don’t be afraid to ask for help; and lastly, know that good advice is an invaluable asset during a construction project.

It is no secret that successful construction projects require preparation, hard work and ingenuity, but there are common elements to successful projects. Twenty years of construction litigation experience, including the resolution of hundreds of construction claims, are “distilled” in the following common sense approach:

“WHISKEY .” They are only “secrets” in that they seem to be unknown to many contractors seeking claims and/or owners faced with a claim:

Write good contracts. Know their contents. Avoid contracts that are overly oppressive. As a contractor and owner, seek to disclaim consequential damages, obtain a global limit of liability, limit indemnities to the amounts recoverable from insurance, limit remedies to repair or replacement within one year of installation, and be sure the scope of work and schedule are fixed.

Handle Problems Promptly with Absolute Honesty. When a problem occurs, enforce your contract rights, and handle problems promptly. It is easy to pretend the problem will go away. But you cannot afford to ignore the problem. It is like an avalanche — it will get much worse unless it is stopped. Proper notice and documentation of the claim are immediate priorities. Assign an internal record-keeper to a major claim event. Do not overload the project manager with yet another “task.” Call in consultants. If they do not prove themselves, replace them with another team of experts. But, most of all, realize that every day that passes will make the problem worse if it is not addressed. The most important project attributes are an iron-clad reputation for honesty, and prompt responses. A project history or claim that contains falsehoods, exaggerations or faulty analysis will not survive the first day of a hearing. It is also important to maintain a business-like approach. The direct statement that certain claim events substantially increased your costs, that you are documenting those expenses, and that you suggest several steps to mitigate the future impact of the problem will be your most powerful weapon later in court. More importantly, by refusing to alienate the client, you will not be creating an additional personal or psychological barrier to payment by their representative. Do not fail to give prompt notice. As discussed in the text, the failure to give proper notice can prejudice the owner’s and construction manager’s ability to respond to your claim and mitigate the costs of your claim. As such, failure to give proper notice will result in rejection of the claim.

Insure the major risks. A catastrophic loss on a project, such as a fire, may not qualify as a claim. There may be no recourse against anyone in the event of a loss, other than applicable insurance. Don’t let major risks slip through the cracks. Use a specialized broker. Insure to reasonable limits and do not accept overly restrictive policy exclusions (e.g., no subsidence liability coverage in a policy covering a grading contractor).

Select the best projects, consultants, contractors & subcontractors. Projects that are well-funded and important will navigate through claims more easily. Look for repeat business and specialized areas of construction where expertise will be appreciated and financially rewarded. Be the best owner and contractor that you can be.

Keep records of the events and costs associated with a claim. It is a relatively simple effort to set up a job account for each significant claim on a project. Have your superintendents and foreman keep records of claim costs. If the contract requires it, submit daily labor sheets for the effort on extras. Submit all extra material costs and standby time, including rental expense. Be sure that additional charges are documented (e.g., extra charge for concrete trucks to standby due to access delay caused by the owner). For owners and tenants, consider a “clerk of the works.”

Enforce the Contract. Set up administrative and field systems that automatically identify and document potential problems. Be systematic and methodical. The Job Cost Accounting System (contractor) or Job Trending System (Owner or CM) should be reviewed weekly to determine if any significant overruns are expected. The contractor should be familiar with the uniform construction accounting procedures set forth in the Public Contract Code commencing with section 22010. Additional record keeping steps should be set up as soon as a potential claim situation is encountered. Be sure to make the records suitable for later admission in an arbitration or at trial.

Yell for Help. The least expensive cost of a construction project is good advice. A claims consultant or experienced construction attorney can provide enormous assistance in resolving claims. One of their tools is legal research. Your claim situation is not unique. There is probably a case that defines what you need to do to get a recovery. The construction attorney can also interview and retain experts in any field, and their views are confidential, due to the attorney/client privilege and work-product protection. It is possible to call an expert on short notice, get telephone advice and resolve a claim in a single day.

Again, while these so-called “Whiskey” guidelines may not seem like secrets, they are only recognized as vital by a few major contractors, who have typically enjoyed a long and profitable history. We encourage you to pass this book along to your contemporaries. It is vital that field people recognize claim situations and report them to company, or public entity management. While not every construction professional can write a claim, or evaluate a legal or scheduling argument, they must all be aware of the basic elements of a claim, and the avenues and obstacles to obtaining payment for valid claims.