Full Article in Properties Magazine

At the most basic level, contracts serve to assign, allocate, and mitigate risk. Parties—unsurprisingly—are typically unwilling to adopt greater risk than required, and often look to assign most of the risk to the other contracting party. While understandable, this approach may have unintended costs.

For the most part, the general risks associated with a construction project are commonly understood and accounted for in broad form provisions. Such provisions alone, however, may not effectively address the unique risks associated with the rise in material escalation, volatile supply chains, increased labor demand, and skilled labor shortages. In turn, disputes related to the foregoing procurement and delivery issues are on the rise.  Even when resolved, contractors and owners alike have been equally dissatisfied.

It is unreasonable to believe that all risk can be identified and assigned from the outset. However, including provisions that require proactive planning, early procurement meetings, and early deliverables may mitigate the chances of procurement issues, and certainly reduce the negative impact should they arise. The risk of the unknown does not have to be solely allocated to one party or another. Encouraging a project centric approach, obligating all parties to engage and share risk, will benefit all parties who choose to adopt such a perspective. Below are some early planning and procurement procedures/concepts that can easily be incorporated into contract terms and/or early engagement project activities.

What can Owners and their Design Teams / Consultants consider doing?

  • Foster early engagement – find a way to create a true collaborative partnership between all members of the team as early as possible:
    • This could be driven by the type of project, but is important to have ALL team members involved as early as possible, including early engagement of the construction team; and
    • For scenarios or projects where the owner is hesitant to engage team members too early for potentially losing pricing competitiveness, there are various ways for an owner to maintain cost confidence from the whole team throughout the entire process.
  • Understand the environment – look for multiple options and rely on input from all team members throughout the process:
    • Establish an environment with open communication being a critical focus piece;
    • Avoid playing the “blame game” and be understanding when difficult news is communicated to encourage continued open and transparent flow of information in real time from all parties; and
    • When soliciting for proposal requests or bids, encourage real-time feedback from contractors, subcontractors, and their material vendors.
  • Be flexible and understanding – be ready for and open to potential alternative options for final product selections:
    • Encourage a streamlined substitution process – perhaps even cater to the project and work ahead with the Design Team / Consultants so decisions can move efficiently and effectively;
    • Wherever possible, avoid sole-source manufacturers or closed-spec materials. Limiting available options in current market conditions can be a recipe for disaster; and
    • If a change is necessary, seek diligent back-up documentation so that decisions can be made quickly with reliable and appropriate information.

What can Contractors consider doing?

  • Encourage open and often communication from the outset, and continue through the entire project;
  • Offer current-trending material procurement information during the bidding process;
  • Create options for team members to evaluate – both time driven and product driven;
  • Provide potential temporary solutions that offer workarounds to achieve substantial completion with minimal, non-intrusive come-back work;
  • Include detailed assumptions and clarifications – part of winning the work is showing the commitment of your team up front, so be sure to include information to help the Owner make a selection, knowing you are the right add to the team; and
  • Evaluate if and potentially recommend that a project would benefit from lower-tier design-assist involvement for an even stronger finger on the pulse of the current market.

Working collaboratively across all disciplines from the early project development phases all the way through substantial completion will help to flush out issues driven by product availability.  It will also help to encourage alternative solutions, whether its flexibility in various materials, multiple design options for specific elements, or temporary construction solutions until those selected materials are available for final installation. 

Many organizations and projects have already adopted early strategy sessions to overcome these and other types of project issues.  With the ultimate goal in mind of mitigating risk across all interested parties, it is important to memorialize the outcome of those sessions.  For instance, consider incorporating agreed upon strategies with an amendment to the contract or a no-cost change order.   The real key is nothing new.  It goes back to what is at the core – teamwork, communication, planning, and execution.  Encouraging this throughout the entire project will create and foster an environment for overall project success with the entire team.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Colten Siedlarczyk Colten Siedlarczyk

Colten Siedlarczyk focuses his practice on construction law and commercial litigation. Colten strives to proactively mitigate risk and position construction clients to avoid disputes.

Photo of Chad J. Van Arnam Chad J. Van Arnam

216.297.4175
cvanarnam@parks-cc.com

Chad J. Van Arnam has 22 years of construction management, general contracting, and owners representative services experience, working collaboratively to deliver well-coordinated and complex projects in commercial and healthcare markets. As Director for Parks Construction Consultants, Chad works with clients to…

216.297.4175
cvanarnam@parks-cc.com

Chad J. Van Arnam has 22 years of construction management, general contracting, and owners representative services experience, working collaboratively to deliver well-coordinated and complex projects in commercial and healthcare markets. As Director for Parks Construction Consultants, Chad works with clients to execute construction project management and risk management procedures and tackle complex project issues and challenges head-on across all construction segments and disciplines.

He provides operational guidance and consultation in the oversight of projects from the pre-planning phase of budgeting, bidding, and resource planning through the construction and turnover phase. Chad works seamlessly with clients in developing, updating, and managing detailed project requirements and control documents, including schedules, budgets, change orders, project meeting agendas and minutes, essential tracking logs, and presentation material.

His extensive knowledge of the construction project process allows him to collaborate with clients and where necessary seamlessly with counsel for developing detailed preventative measures to avoid legal troubles during their projects.

Prior to joining Hahn Loeser, Chad served as Senior Project Manager for Sodexo USA, representing University Hospitals Cleveland Medical Center. He also served as the Self-Perform Operations Manager and Project Manager for Turner Construction, overseeing multiple multi-million dollar construction projects.

Photo of David A. Elsey David A. Elsey

216.274.2447
delsey@parks-cc.com

David A. Elsey brings 17 years of construction operational excellence to Parks Construction Consultants.  Dave has worked collaboratively over his career to effectively deliver projects in public and private commercial markets including healthcare, higher education, K-12, institutional, hospitality, retail, office space…

216.274.2447
delsey@parks-cc.com

David A. Elsey brings 17 years of construction operational excellence to Parks Construction Consultants.  Dave has worked collaboratively over his career to effectively deliver projects in public and private commercial markets including healthcare, higher education, K-12, institutional, hospitality, retail, office space, multi-family, and more.  As Executive Manager, Dave partners with clients to execute construction project management and risk mitigation procedures.

Dave has extensive experience overseeing projects from the pre-planning phase of budgeting, bidding, and resource planning, all the way through the construction and turnover phases. He has developed and implemented processes related to project management & project engineering in all stages of construction projects from project estimating, bidding, buyout, scheduling, site logistics, project planning & documentation, job costing & reporting, labor productivity & tracking, and project punchlist & closeout.

Prior to joining Hahn Loeser, Dave served as Director of Project Management for Tober Building Company where he was responsible for developing and implementing internal processes related to project controls for the project management and project engineering field teams. Dave also served as a Senior Project Manager for Turner Construction overseeing projects for clients such as Cuyahoga County, Cleveland Clinic, University Hospitals, St. Ignatius High School, John Carroll University, Hilton Worldwide, JP Morgan Chase, and more. Throughout his career, Dave has provided oversight & management of more than $700m worth of successfully completed construction projects.