Imagine this scenario:

• You are about to start work on a large construction project.
• You are one of many contractors with different priorities, each interested in making the most profit for themselves.
• Your work must be performed according to information that you obtain from a series of symbols, diagrams and drawings made available on large sheets of paper (or electronic versions).
• There are several volumes of written documents with additional information that you must follow.
• There are also diagrams that dictate who is to work on specific tasks (out of thousands) at various points in time, in prescribed order.
• Your estimate is based on the cost of labor, materials, equipment and other expenses that will fluctuate (usually higher) over time.
• You will be financing a portion of your efforts throughout the entire time you are working on the project.
• Your work will be subject to inspection by authorities with various interpretations of what constitutes “acceptable” work.
• There will be many changes to your work, interference and conflicts with others, frequent delays, errors, and all types of issues that will affect your work.
• Finally, you are also given a document that contains all of the detailed, specific rules for executing the work you have agreed to perform (the “contract”).

Now I ask you, given the above conditions, wouldn’t you want to get to know the contents of this document in all of its detail?

You may find this surprising, but based on my experience;

• some contractors don’t read their contracts, they only check price and scope,
• few try to negotiate restrictive or unfair terms,
• many don’t get all the documents that make up their contract,
• few contractors really use the contract to manage a construction project.

Even in the case where the contract is reviewed in detail, often it’s placed in a file drawer (usually ignored) until that point in time when the “stuff” has hit the fan and it’s time to call the lawyer.

This practice has led me to label the contract the “Rodney Dangerfield” of construction documents!  It is a document that simply “gets no respect.”  So why is that the case?  Although I can think of many reasons, the short answer is this: contracts are written by lawyers; you’re not supposed to understand them without familiarity with legal jargon and concepts.

A contractor’s reluctance to seek the help of an attorney to review the contract before execution is understandable.  Contracts can be intimidating and a good attorney will command a hefty fee that may seem prohibitive.  With razor-thin profit margins on most projects, every dollar saved is a dollar earned, or so you may think at the beginning of a project.

Unless you are a contractor that has never had any serious problems on your jobs, you know from personal experience that when things go wrong during construction, it’s the language in the contract which dictates the “rules” that are applied to resolve problems.  This is especially the case when serious issues arise which threaten to increase significantly the cost or construction time.  At that point, all verbal agreements, unwritten promises and other informal understandings are forgotten.  Suddenly, the good will and that cooperative “team spirit” that you had enjoyed earlier disappear.  From that point on, every consideration, each decision and all action will be strictly based on what was agreed to in the contract.

If you did not seek expert advice at the beginning, and started without a working knowledge of the contract, you will probably rush to an attorney out of fear when action is required after the problem has reared its ugly head.  Making matters worse, due to your lack of understanding of the contract, you will need to spend more time with your attorney to guide you through the maze of contract clauses to choose the best course of action to take.  Acting out of fear you may even decide to have your attorney draft all your letters for you.

Finally, since you were not following the “rules” of the contract to provide the required timely notice of problems, preparing a record of communications in advance before the issue moved to the “front burner”, you will find that you’re playing catch-up.  Sadly, by then, you might already have spent more in legal fees than you expected, yet you may have only begun to scratch the surface of the problem!

In my experience, it’s the lack of understanding of the contract which causes many construction issues to be mishandled from the beginning.  This is primarily a result of not knowing the requirements in the contract that address how you must communicate and record important issues; the kind of issues that typically lead to increased cost or time of performance on a project.  In those cases, when the issues are not documented according to the contract, the ultimate resolution of the problem will take longer and will be costlier than necessary.  Usually, those issues won’t get resolved until the end of the project and lead to reduced profit or a loss on the project.

Regardless of your distaste for lawyers or your opinion that they are too costly, if there is one time during the entire life of the project when spending money on an attorney makes sense, the initial review of the contract before its execution, would rank as the most important one!

The contract is a document that needs to be thoroughly understood in order to be used actively during construction by applying its rules to the work.  Don’t let your contract be the Rodney Dangerfield of construction documents!

“I get no respect.” – Rodney Dangerfield

© Farach Consultants, Inc.  •  all rights reserved  •  954.434.7710