Lessons Learned #40: A Message of Gratitude

As another year ends, we pause our busy world of work to reflect. When we think of the good fortune we’ve had, the wonderful bonds we’ve created, and the good times we’ve shared with customers, co-workers, and friends throughout the past year, we realize we should be grateful.

I find that gratitude is an attitude that many people would do well to adopt more often (myself included). When we are grateful we are focusing on that which is outside of us, not of our own making. Whether it be our relationships, our physical condition, our peace of mind, or our material wealth; each of us can relate to the fact that in one or more of these areas we have been blessed in abundance!

I sincerely hope that this Holiday Season you will take stock of your blessings, and in grateful recognition, share some of your good fortune, your time, or affection with those who you know are less fortunate or in need of it most.

I extend my most sincere wishes for your good health, family relations, and profitable business in the coming year! I would also like to thank my clients for trusting me with their business challenges.

In humble gratitude, and with my warmest personal regards and best wishes for a most joyful Holiday Season to you and your loved ones,

Paco Farach


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


Lessons Learned #39: Your Best Project May Be The One You Don’t Take

Construction contracting is a very risky business. It’s one of the few arenas where the financial rewards can come very quickly. However, it’s also an undertaking where even large, established companies can go out of business just as quickly!

There are several reasons for this, among them:

  1. Contract amounts are based on estimates for the work created from incomplete bid documents.
  2. Contract language that can create risks and unforeseen obligations, without a corresponding opportunity for recovery.
  3. On most projects, the contractor (primarily the lower-tiered ones) is financing the cost of the work – especially for changes that typically don’t get approved until well after the work has been completed.
  4. Numerous other variables that change over time and add to costs and time of performance for the work.

All of the above have the effect of stacking the deck against you, diminishing your chances of success.

In my opinion, the most serious of the reasons is that of the terms and conditions of the contract. The failure to negotiate fair terms and conditions in contracts has the potential all by itself of producing devastating results for your company when things don’t go the way you planned on a job. Let’s face it, there is always the potential for that!

A long time ago, when I was working as a subcontractor, I was involved in a project that had gone bad. I had just finished attending a bitter all-day mediation session in which I had settled my company’s modest claims for additional compensation. My customer, the general contractor on the project, had not fared as well, having lost a significant sum of money despite years of hard work.

During the car ride back to our offices I observed that he was understandably upset over the outcome, yet relieved that his ordeal had finally come to an end. I took the opportunity to ask him what he would have done differently, now that he had the benefit of looking back. Without hesitation, he stated “we should have walked away from the contract when we were in negotiations.” He informed me that his company had spent a great deal of money in legal fees over several months in order to be able to execute the contract.

He went on to explain that his customer (a developer) was run by a group of lawyers who were intent on crafting a deal which was as one-sided as possible. His company’s desire to build the project had overshadowed the need to have a fair contract that could have provided the foundation for a workable relationship with his customer.

The “lesson learned”; he should have just walked away!

Learn more about contracts and their risks in my book Document to Reduce Risk. There, I explain how the contract contains “the rules for construction” and I demonstrate how to apply those rules to the job of project management. You will also find numerous examples to help you prepare construction documentation in ways that will allow you to minimize the risks that are inherent in all projects when dealing with various conditions (sample letters included in Appendix B of the book). You can obtain a print or e-book copy through my website. The e-book version will allow you to cut and paste the sample letters you need.

“A wise person does at once what a fool does at last.  Both do the same thing; only at different times.” – Lord Acton

                                                      A THANKSGIVING MESSAGE
At this time of year I am always reminded of how fortunate I am to have a very loving family, friends, and good health. I want to take this opportunity to wish all of you a very Happy Thanksgiving. Please take the some time to appreciate one another, and to give thanks for all of the blessings you have in your life.
With my best personal wishes, Paco Farach.

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

Lessons Learned #38: Keep Your Options Open

Most people are aware that when making plans for an event or preparing for a trip, there are a variety of options that require choices to be made within specific time periods, or the options expire. The expiration of some options may affect the outcome in ways that are significant, even drastic.

For instance, if you plan to travel to a popular destination for a special event and would like to arrive there two weeks from now, you have the option of flying, or driving, among others. However, if you wait too long to make travel arrangements, you may find that some of your options have been restricted, or eliminated, due to lack of availability (no space remaining on flights, sold out hotels, or only very expensive choices remaining). Where you thought you had an option to fly or drive, you are now limited to driving. In addition, you may end up having to stay far from the venue for your event, which could result in additional complications for you.

In the example above, there were options available to you, that, through lack of a timely decision, or through your failure to act, the resulting outcome was substantially different from your expectations. The bottom line in these situations is that you need to be aware of the options you have, the rules for exercising them, and take action prior to their expiration if you wish to have a chance to participate in the benefit from that option.

The same can be said about the options available to you when you are performing your work under a contract. You may not think about it in this way, but imagine your contract is an evolving document which can change in size and shape. Each time that certain conditions arise during construction, you may have the option to modify that flexible document to account for the new condition. However, you can easily lose the option to make that change through your failure to take timely action, or by taking an improper action. You may be wondering what is the key to keeping your options open under a contract? The answer is found in one word: “NOTICE”.

Notice can be defined as making someone aware of a fact or a thing. In everyday practice, this could be done simply by telling someone about that fact or thing – in other words, through ordinary conversation (a common form of communication). However, the term “notice” is usually defined in a contract to mean a very specific type of communication. Contracts will typically define:

1. how the notice is to be communicated (usually in writing),
2. to whom the notice must be given,
3. how the notice must be delivered (e.g. certified mail, or hand delivery), and most importantly,
4. when the notice must be delivered.

The failure to provide “proper notice” as defined in a contract could take away your option to modify the contract to account for a condition which would otherwise give you the ability to make a change to compensate you for additional costs and time associated with the condition.

Providing proper, timely notice is not difficult, and need not take a lot of time. However, you need to be informed about the specific requirements for the notice from the language in your contract. Contracts can vary greatly in their requirements, and you should be aware that there may even be different requirements for giving notice of different conditions within the same contract.

Remember, to keep your options open you must provide proper notice in accordance with your contract. The failure to provide notice is one of the most common issues in dispute when attempting to recover additional costs and time on construction projects.

Learn more about notice in my book Document to Reduce Risk, where I call notice “the most important rule” of the contract. You will also find numerous examples for preparing your notice when dealing with various project conditions in the sample letters included in Appendix B of the book. You can obtain a print or e-book copy through my website. The e-book version will allow you to cut and paste the sample letters you need for your notices.

Missed any prior issues? Get copies from the “Lessons Learned” tab on my website. Until next time, Paco Farach.

“There is no promised road leading to definite results. What is important is how to keep open as many options as possible.” – Makoto Kobayashi

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

Lessons Learned #37: Prepare To Win

I assume most of you are familiar with the degree of preparation that is undertaken by all teams prior to their participation in a sporting event. It’s also generally accepted that the team best prepared for the event will have the upper hand, and the best chance of winning.

Although as a subcontractor (or contractor) you are not actually engaging in a sporting competition when you start a new project, I think there’s a valid comparison that can be made. When it comes to your potential successful completion of a project, the better prepared you are, the more likely you will be to have a profitable outcome.

The most critical time for a project is at the beginning, before major work activities are undertaken. Your investment of resources to prepare thoroughly at this stage in the life of a new job should reap rewards for you as the work unfolds. In addition to having a “game plan” for the new project that anticipates the key points or crossroads through which your team must maneuver, you will also have a more informed and prepared management staff that will be able to deal with the problems that are bound to materialize along the way.

Having been a participant, or a consultant on many projects during my career, I have concluded that the construction industry as a whole does not devote sufficient management resources during the early phases of a project to maximize the possibility for a successful outcome. I am referring in particular to the two critical periods during the early life of a project – the transition from estimating (or sales) to construction and the period from mobilization to the release of the first substantial group of work activities in the field.

Transition from sales to construction:

Quite often it seems that the hand-off from sales (or estimating) to construction (or production) takes place hastily, without much interaction or detailed explanation of the assumptions that were made in the estimate that led to the contract. This can be due to many factors, such as 1) lack of available management staff to assign to the new project (until the last minute), 2) lack of time to perform a proper project transition, 3) failure to recognize the importance of the transition process to the success of the new job, or 4) numerous other reasons.

There are several key points that bear emphasizing during the transition from sales to construction:

  • The transfer of information must be thorough – all of the information available to the estimating staff (including errors or omissions in the estimate) should be shared with the construction team.
  • All relevant contract clauses that affect the execution, changes, re-sequencing, delays, and other key aspects of the performance of the Work should be reviewed and understood by the management team.
  • If contract negotiations have not been completed, the construction team should offer its recommendations during the transition period.
  • In addition to sharing all information known by the estimators, the estimate and underlying assumptions should be challenged by the field management staff (access to work, means and methods, work conditions, and other factors that may affect labor production).
  • Adjustments to the estimate (budget) should be made based on this thorough review during the project transition meeting.
  • There should be a review of the contract schedule and its treatment of your work activities (completeness of work activities, predecessors, logic ties, sequence, duration, concurrent activities, etc.).
  • This is the time to prepare a more detailed schedule of your work that ties to key predecessor activities from the overall project schedule, if one doesn’t exist. If at all possible, a resource loaded schedule should be done (incorporating at least the planned labor man-hours into the baseline schedule).
  • Significant potential conflicts and equipment submittals that are critical to the schedule should be identified and communicated to the customer.

Period from mobilization through the release of first substantial group of activities:

During this initial period on-site, there are numerous important administrative tasks that need to be performed in addition to the establishment of personal working relationships with your customer’s field staff, as well as that of the other key trades. Furthermore, you may not be afforded a great deal of time between mobilization and performance of your first field activities, which means that you may have the added burden of gearing up quickly with manpower, tools, equipment and materials for active production.

Below are some of the many tasks that need to be performed during this initial period with emphasis on some key aspects of the tasks that should not be missed:

  • Establishing a nucleus crew (make sure that your key supervision is fully informed from the project transition meeting).
  • Acclimating to the job and other trades on site (establish a good working relationship with the key trades that affect your work; especially for predecessor activities).
  • Set up operations, logistics, supplies, storage, tools, access to work, etc.
  • Establish a system to monitor the key predecessor activities and other events that impact your work (prepare forms to provide notices as required by contract).
  • Submittals, substitution requests, Value Engineering items (set deadlines and track their progress).
  • Set up job cost to track work and production (to monitor labor productivity).
  • Set up Daily Reports, payroll reports, and other administrative forms (make sure superintendents and foremen understand what information needs to be provided in the Daily Reports).
  • Attendance and procedure for project coordination, scheduling and safety meetings (have procedure for correcting, or supplementing all meeting minutes).
  • Establish procedure and system for documenting progress of work through photographs, charts, and schedule notations.

I have only covered some of the key steps that must be taken during the transition and early phase of a new project in the lists above. I think you will agree that in order to accomplish all of the tasks properly, it’s necessary to devote substantial management resources and time. The more thoroughly your company prepares during the transition and dedicates the appropriate resources during these early phases of a new project, the more effective it will be in its execution of the work.

I have seen many poorly prepared project teams fall behind early in the life of a job and never fully recover from their lack of preparation. Those that fall behind continue to struggle throughout the job and are in a constant state of “reaction” to unexpected events that they simply could not foresee, since they were unprepared. The management teams in those cases never get the time to plan, so they are managing from one crisis to the next.

I hope that your company will prepare for its next new project just like a professional sports team – with any luck, your results will put you in the winning column!

“It’s not the will to win that matters. Everybody has that. It’s the will to prepare to win that matters.” – Paul “Bear” Bryant

Missed any prior issues? Get copies from the “Lessons Learned” tab on my website. Until next time, Paco Farach.

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

Lessons Learned #36: Lessons I Have Learned During The Past 25 Yrs

I trust you followed my advice in last month’s issue and made time during this Memorial Day weekend to “sharpen the saw.” This month marks the completion of 25 years of consulting service for my company in the construction industry. As I was sharpening my saw on the golf course, I found myself reflecting on the past. It’s amazing that so much time has passed since the day when I first decided to step away from the subcontracting world to dedicate myself to the task of advising others.

Through my consulting work, I have interacted with many clients during this period. I have had the incredible opportunity to observe and participate deeply in countless complicated problems and to have played a part in their resolution. I’ve dealt with all types of construction entities large and small. In representing the diverse participants, I have observed the industry through different perspectives, from that of developers, owners and design professionals, to that of subcontractors and specialty trades. Over the years, the accumulated experience has given me a much broader perspective, like that of a pilot or astronaut looking down from a very high altitude. As part of my work, I need to dive very deep into the details of problems, yet at the same time, I find that I’m able to maintain a clear “big picture” view.

This combination of experiences and perspectives has motivated me to share with you some observations that I am calling “Lessons I Have Learned During The Past 25 Years.” I chose only the first 10 that came to mind. I’m sure I could offer a much longer list, but these writings are supposed to be “tidbits of wisdom”, not volumes, after all. So here they are;

1. Construction companies come and go, but their problems remain the same.
2. Projects get started with construction documents that are progressively less complete.
3. Technology has facilitated the work, but the skill and quality of labor continues to decline.
4. Contractors are using more hi-tech software and devices, but their management of the work has not improved.
5. The leverage in contracts continues to shift up the ladder, favoring GCs and Owners, while the risks continue to shift down to the subcontractors.
6. Contractors’ management personnel have more “education” but less communication skills.
7. General Contractors continue to promote better relationships and “teamwork” with subcontractors under various program titles, but their actual practices have hardly changed.
8. The bigger the project size (and cost), the greater the likelihood (and expense) of major problems and disputes.
9. The cost of resolving disputes through arbitration or litigation has almost become prohibitive for all but the largest, well funded contractors and subcontractors.
10. What is common sense, continues to be less and less common practice!

These observations are generalized of course, there have been those isolated cases which have served as notable exceptions to one or more of them, but sadly, they have been very few indeed.

Shortly after I started my consulting practice, I began to advocate training and continuing education to improve the management of construction projects. My emphasis has been on better communications, especially on proper documentation as a tool for managing work and reducing risk. I have devoted a great deal of time to develop seminars and printed materials to accomplish that goal. Many contractors and subcontractors that have taken advantage of this training through my seminars and publications are hopefully better off, as a result.

I have been encouraged by the positive response that I’ve received for proactive consulting that allows me to work as advisor to project management teams on larger jobs from the beginning. That was my primary goal which motivated me to start my consulting work long ago. I believed that I could help others avoid the big disputes that have almost become “a way of life” for contractors on big work. If the disputes can’t be avoided, then my involvement will serve to minimize the associated expense and hardships that are a part of the process. In addition, my clients are better prepared and have a much stronger position when the time comes to sit at the bargaining table or in front of a third party.

I will continue to dedicate a larger portion of my practice to the goal of training and proactive management assistance. If you would like to discuss how we could work together to achieve those goals for your construction business, please contact me for a consultation.

Franklin’s axiom (below) is as true today as it was when he came up with it. By the way, he was referring to fire safety, which I find to be an excellent analogy for the type of problems that arise during construction projects. After all, many of you have come to view the job of a project manager as that of a “fire fighter”, right?

“An ounce of prevention is worth a pound of cure.” – Benjamin Franklin

Missed any prior issues? Get copies from the “Lessons Learned” tab on my website. Until next time, Paco Farach.

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

Lessons Learned #35: Take Time To Sharpen The Saw

For many of you, this is the time of year when you start planning and looking forward to Summer vacations. For most people, a vacation is typically a time for personal relaxation, a period of time (however brief) when they can unplug from work, responsibilities or other fixed routines in life that are governed by commitments. A successful vacation can result in feeling a renewal of energy or a refreshed attitude. Most people would agree that a vacation will produce positive benefits, among them an increase in their personal effectiveness.

In a similar manner, we need to look at ways that we can achieve these goals in our businesses; to try to increase our managerial effectiveness. Those of you who have read Stephen Covey’s book “The 7 Habits Of Highly Effective People” might recall that he labeled the seventh habit “sharpen the saw”. If we applied this habit to business, we could illustrate the point with the following story…

There was a manager in charge of cutting down trees to clear the way for a new project. As the task was taking longer than expected, his boss came out to see if there was a problem. The boss observed that the crew was working furiously with their saws. However, it became apparent to him that the saws had become dull in the process. When he asked his manager if he was taking the time to stop the work periodically so that they could sharpen their saws, the manager responded in amazement “why would you want me to stop their progress, can’t you see they are too busy sawing to take the time to sharpen the saws?”

As absurd or comical as this story may sound, I believe this practice is more common that you may think. Even experienced managers can fall into the trap of being so busy and absorbed in their work, that they fail to see the bigger picture or to ask the key questions about their work. Good management involves more than just making sure that workers are busy, doing their assigned task without goofing off. Management effectiveness takes into consideration how the workers are to do their assigned tasks in order to achieve the best (or optimal) results for the company. The effectiveness of management can be improved through one or more of the following:

● Education (training, seminars)
● Employing alternative means or methods (think process or tools)
● Taking a break from the routine (aka: vacation)

In order to improve your business you need to take a step back periodically to assess what you are doing, how you’re doing it, and to question it all from a fresh perspective. You need to adopt a program of continuing education for your employees (and yourself), taking what is learned and applying it to your current business practices.

Your business, much like your personal life will get stale, or boring if it isn’t refreshed periodically. Perhaps you’ve had the experience of implementing a much-needed change in your company as a result of a fresh idea that originated unexpectedly from a new employee. Or maybe you attended a seminar in which you heard something from a guest speaker that served as the catalyst for revamping your procedures. It’s reasonable for you to get into a rut if you proceed day after day, year after year with a “business as usual” approach to the management of your business and your work.

I hope I have made you more aware of the importance and the necessity to “take time to sharpen the saw.”

“Take Time To Sharpen The Saw” – Stephen Covey

For the record, I always try to practice what I preach! This is proof of a recent effort I made to “sharpen my saw” at a very nice golf course near Orlando.

2017-04-13 Eagle Creek Golf Club-Paco-crop

Good news for those of you who have yet to purchase a copy of my book “Document to Reduce Risk”. The e-book version is now available at Amazon and Barnes & Noble (only $24.99). This format gives you immediate access to valuable advice and many sample documents you can use to write about typical issues on your projects (available for download through links from the e-book directly to your smart phone, tablet, or computer). With a copy of this resource, you will carry with you the tools you need to stay ahead of the game with good documentation to reduce your risk!

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

Lessons Learned #34: Is It Time To Start Letting Go?

Those of you who have been following my advice here over the past 3 years know that I like to ask engaging questions, designed to make you think. Over the course of my work, I’ve had exposure to many different businesses. Being naturally curious and analytical, I have taken mental notes of the variety of management structures, styles, personalities and effectiveness of those who are at the top of their organizations. If you’re in charge of your business, I’d like to ask you the following questions:

  • Are you still at the top of your game?
  • How much longer can you manage your company?
  • What would happen to your company if you were suddenly incapable of doing your job?
  • Is there someone on your staff that could do a better job?
  • Are you training your replacement?

Most leaders behave as if they will always be around to do what they love (some even act as if they’re indestructible). Despite knowing that we are aging and feeling the difference in our ability to deal with the stress that comes from the accumulated years of working under a heavy load, most of us plow ahead each day, failing to plan for the inevitable.

No, I’m not taking about “THE INVEVITABLE”, as in your demise, simply the fact that the job of a leader requires a great deal of vigor and endurance to continue year after year. The work can be exhausting, physically and mentally.

It’s really much more than that though. As the years come and go, your business may have grown beyond what was once comfortable, or within your managerial scope or expertise. There are many other factors that may have undergone significant changes as well, such as:

  • the degree of competition in your business environment
  • advancements in technology and their implications to how work is done, tracked and managed
  • worker attitudes and values

Over time, the evolution of business and its environment demand comparable changes in your organization, requiring adaptation in order to continue to be successful. It’s likely that several, if not all of these factors, have conspired to cause major changes for you in your business. You probably don’t need to go back very far to see how different the challenges are to manage your company today. I should also add that if you’ve been building and running your business for some time, you might be feeling the effect of many years of stress.

If you’re honest with yourself, you will recognize that there are many aspects of your job that could be done better, more efficiently, and even with less effort by someone else who is more in tune with the current trends, technologies and “people know-how” than you! Even if you’re still the most qualified to lead your company, you may find that you’ve become complacent in your skills, lost some of your drive, or simply lack the energy to plug in every day as needed to keep performing at the level that you know is needed to keep your company on top.

Whatever your specific situation, if my questions have hit a nerve, perhaps you should start working on a management transition plan for the future of your company. A starting point could involve one or more of the following steps:

  1. Identify key employees in your organization that could be groomed to take on more of the management responsibilities, make more decisions and take some of the load from you.
  2. If there are no internal candidates to fill your shoes, you should actively begin the search for someone new, looking within your industry first.
  3. Set a realistic time frame for your transition. It doesn’t have to be a complete transition if you can serve in a more limited role as “Chairman of the Board”.
  4. Your plan should include the necessary training programs for those key employees that will be promoted to take over the various aspects of your managerial functions.
  5. If your company doesn’t already have one, an employee equity plan may be necessary to motivate them to engage with the level of commitment and effort that is required to make the transition a success.

“When a mature and able manager feels bored, he should seriously consider changing jobs, changing companies—or simply retiring. It is not fair to anyone for half a leader to hold a full-time leadership job.” – James L. Hayes

Good news for those of you who have yet to purchase a copy of my book “Document to Reduce Risk”. The e-book version is now available at Amazon and Barnes & Noble (only $24.99). This format gives you immediate access to valuable advice and many sample documents you can use to write about typical issues on your projects (available for download through links from the e-book directly to your smart phone, tablet, or computer). With a copy of this resource, you will carry with you the tools you need to stay ahead of the game with good documentation to reduce your risk!

Thank you for your continued interest in my publications. Your comments are always encouraged – Paco Farach

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

Lessons Learned #33: Getting Back To Basics

With the start of a new year, it’s normal for us to reflect on the year just ended.  That usually involves thinking about those things that turned out well for us, and those that didn’t.  While it’s in our nature to dwell on the good, it’s been my experience that we’re apt to learn much more from our difficulties, or failures, than from those circumstances that turned out well.  I’ve noted that many of our problems begin when we fail to execute on the basics for our work.

With that in mind, when I started thinking about what I should write for this first issue of 2017, I decided to offer you my suggested outline of what to do and what to avoid during each of the key steps from bidding through mobilization of a project.  As you go through this list, think about how you could have done a better job at each of the steps, and how that may have prevented some of the problems you had to struggle with last year.

  1. Estimating work:
    • Be thorough, include all work
    • Adjust labor units to factor conditions that may affect the difficulty of the installation (height, access, restrictions, weather, overtime needed)
  2. Contract negotiations:
    • Get all the documents included in contract
    • Review (have lawyer advise)
    • Negotiate main clauses (payment for extra work, directives, sequencing of work, delays)
    • Don’t start substantial work before contract, without agreement for payment
  3. Schedule:
    • Review your portion of the work within the overall schedule, make sure it’s realistic
    • Make certain your work is represented properly (activities, duration, logic)
    • Propose changes to make corrections, or to fit your needs
  4. Turnover from Estimating to Construction:
    • Review scope (specifications, alternates, submittal requirements, special long-lead material or equipment)
    • Review schedule (identify key predecessor activities for tracking)
    • Identify key resources needed (project management and supervision, available labor, equipment, special tools)
    • Prepare schedule of values, set up job cost and tracking for job
    • Review budget and cash flow projection
    • Final contract review

While this outline is by no means comprehensive, it should cover the essential elements of the process that takes a project from the bid stage to the field.  By taking the time to reflect on problems you experienced last year, identifying the areas where you need to improve upon, and adjusting your procedures to ensure you don’t repeat the mistakes made in the past, you will be on your way to start this new year on the right track.

Want more help to improve your company’s procedures, or to provide additional training for your staff?  Make it a New Year’s resolution to schedule some educational seminars for your project management team.  Visit my website for more information, or call me to discuss how we can customize the training to fit your needs.

E-Book version now available!

Good news for those of you who have waited to purchase a copy of my book “Document to Reduce Risk”. The e-book version is now available at Amazon and Barnes & Noble (only $24.99). This format gives you immediate access to valuable advice with all of the sample documents you can use to write about issues on your projects (available for download through links from the e-book directly to your smart phone, tablet, or computer).  With a copy of this resource, you will carry with you the tools you need to stay ahead of the game with good documentation to reduce your risk!

Thank you for your continued interest in my publications. I sincerely hope that you and your families had a loving, peaceful holiday season.  Nancy and I had our children and grandchildren visiting during the period from Thanksgiving through Christmas.  We also were hosts to Nancy’s mother and siblings who came from all over the country to attend the wedding of one of Nancy’s daughters.  It was joyful, playful, and very hectic at our home during the entire time.  We were reminded once again of how truly blessed we are!   – Paco Farach

“You can’t change the world if you don’t know the basics.” – unknown

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

Lessons Learned #32: Liquidated Damages – Don’t Become A Victim

Possibly the worst outcome that you can face on a project is that of being assessed liquidated damages (LDs) for delays. This can be a nightmare, especially if you had nothing to do with the issues that caused the delay!

I’ve decided to give you some recommendations in this issue to help you avoid becoming a victim of LDs. I am assuming, of course, that you don’t actually deserve them.

Negotiate your contract: When it’s time to negotiate your contracts, I think the following points are essential.

  1. Make sure you’re not automatically put in the “pool” to share LDs with others, if you don’t cause the delays.
  2. Try to negotiate a “grace period” of delay before LD’s are assessed.
  3. Have an accurate detailed CPM schedule that shows where/when your work is critical (do it for the Baseline Schedule and for all subsequent ones).
  4. Make sure the schedule is correct with realistic durations for your activities, and that predecessor activities are identified.
  5. Establish a limit to LDs for your contract work (by percentage or dollar value).

Delays are real, so are LDs: Though many contractors think of LDs as “penalties”, they are not; delays present added, real costs to the owner (just like they cost you). Proactive identification of potential delays will provide the owner more options to deal with them (or avoid them). If you take a proactive approach, you will be viewed as cooperative, trying to mitigate the impact to the owner. It will be harder to pin LDs on you at the end, if it’s not clear that you were directly at fault.

LDs are REAL! Contractors who don’t perform well become easy targets in delays. There is a tendency to pile on when damages are in play. I have seen more cases of LDs assessed recently, which confirm what I’m describing. It only stands to reason that assessment of LDs are nearly certain, when project delays are severe.

Avoid 4 common mistakes: Below is my list of key “Do(s) and Don’t(s)” to follow.

  1. Don’t sit back and let problems happen without notice; be PROACTIVE. Spot the problems that have potential to delay your work before they occur. Be sure to document events that affect the critical path of your work.
  2. Don’t be the cause, PERFORM. Demand that your team execute its work as if you were the owner of the project.
  3. Don’t ignore problems. When your work is under the spotlight of “the critical path” (whether you were the cause of delays or not) don’t contribute to the problem by conducting business as usual; do all you can to mitigate delays (expedite, work around issues, micro-manage activities to get out of the critical path.
  4. Demand additional payment for “extra work” efforts (e.g. acceleration, re-sequencing, added manpower, etc.) if you are not at fault and are cooperating to mitigate the delay for others. You must document these efforts! Don’t do extra work without a change order, directive, or contract mechanism that will provide restitution for your efforts.

Build your firewall against LDs:
1. Negotiate terms in contract;   2. Be proactive – document potential delays/issues;
3. Perform;   4. Manage to mitigate;   5. Get mechanism for payment (if not at fault).

Don’t assume it won’t happen to you:
It is naïve to assume that you will not be the target of liquidated damages if there are delays on a project. Your relationship will not protect you from LDs when they are assessed. Remember as well that your leverage is at its lowest point at the time LDs are assessed (at the end of job).

Failure to negotiate, be proactive, document issues, perform, or mitigate will nearly guarantee you will fall victim to LDs at the end.

You’ll find additional advice in my book and the seminars in which many of my clients have participated. Some clients have recognized that they lack the discipline to ensure that they consistently apply these valuable safeguards on their active projects. They have decided to involve me in their on-going jobs to provide periodic monitoring, documenting and training as an effective way to ensure compliance and reduce their risk of LDs (and other liabilities).

E-Book version now available!

Good news for those of you who have waited to purchase a copy of my book “Document to Reduce Risk”. The e-book version is now available at Amazon and Barnes & Noble (only $24.99). This format gives you immediate access to valuable advice with all of the sample documents you can use to write about issues on your projects (available for download through links from the e-book directly to your smart phone, tablet, or computer). With a copy of this resource, you will carrying with you the tools you need to stay ahead of the game with good documentation to reduce your risk!

Thank you for your continued interest in my publications. – Paco Farach

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


Do you have a list of conditions that are critical for successful execution of your work on construction projects? Why not! My guess is there are probably 10 or less key conditions that, if met, would go a long way toward allowing you to achieve your profit goals on a project.

Wouldn’t it be helpful for you to have them recognized in your contracts?  Have you ever really tried to work them in? I know several contractors who have developed a list of the essential conditions that they must have in order to increase the chances for their company to meet or exceed their goals.

Whether or not the list of those special conditions for your work are accepted in your subcontracts, l believe there is great benefit for you to identify what they are. Think of them as necessary milestones, or checkpoints on the path of successful management and execution of your contract.

Let me offer the following steps for identifying and developing that list for your particular work.

  1. Identify the basic parameters that you need for efficient performance of your work. This could be things like; adequate laydown area, completion of concrete pours, removal of shoring, unobstructed use of floor area, vertical access, etc.
  2. Describe those parameters in more detail – think in terms of specific project conditions that need to be in place (or those that must be avoided) in order for you to perform your work. It’s helpful to organize them for the various stages of a project: e.g. underground, slab, or shell erection, framing, finishes. Here, it’s important for you to describe what the condition looks like. An example would be that you require clear, unobstructed use of 50% of the floor area (not fragmented) before you can mobilize equipment, materials and personnel to install the framing on a typical floor. Another example would be that prior to commencing with erection of steel columns, the anchor bolts must be verified by survey to be correctly located. Another condition common to many subcontractors may be that access to certain areas is to be made available to your company on an exclusive basis for a specific period of time (without obstruction from other trades).
  3. Wherever possible, your conditions should be tied to the key activity descriptions from the project schedule that pertain to your work (noting those activities that are predecessors where appropriate).

I encourage you to get into the habit of making a list of the key conditions for your work, and providing the details that connect them to specific performance parameters. If you make it a practice to include them with your proposals at bid time, you will increase the likelihood that they will end up in your contract.

Negotiations of these special conditions is facilitated when they are perceived to be a “standard” for your company (or the industry). Many subcontractors have been successful in getting some of the special conditions that pertain to their trade approved by having them adopted by their particular industry trade association as part of their standard of practice (and in some cases as part of the recommended specification for their trade).

I hope this will motivate you to take action, so that the next time you find yourself negotiating a contract, you will apply what I’ve discussed here and find that you’re able to change the “rules” to fit the particular needs of your work. ***

*** The e-Book version of my book “Document to Reduce Risk” is now available at Amazon and Barnes & Noble for only $24.99!  Download your electronic copy today.

“Any fool can make a rule

And any fool will mind it.” – Henry David Thoreau

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