Risk Management Articles

The Perfect Project: A Fairy Tale
By Ronald N. Eakin, FCSI, CDT

Once upon a time, there was a perfect construction project. The design was perfect and redesign was not necessary. The pricing went perfectly and well within the owner's budget. The perfect contract was signed and the project started as planned. The contractor provided a perfect schedule in the proper sequences, with completion per the contract documents.

The owner paid his bills on time and the architect's contract administration was minimal. There was no rejection or return of shop drawings or submittals, no rejection of materials or equipment, no Requests for Information (RFIs), no architect's supplemental instructions, no deviations from the work, no Construction Change Directives (CCDs), and no change orders.

There were no accidents or incidents causing physical damage or bodily harm. Substantial completion was achieved on time, and the owner made final payment with a "Thank you." This being a perfect project, there was no mediation, arbitration, or litigation.

You have had nothing to do with construction if you believe all of this is possible. In our litigious industry, imperfect people work with imperfect materials and equipment to construct a one-and-only kind of product within a given time frame. Of course, being imperfect is no defense for failing to perform or performing in an improper manner. The magnitude of failures and the inability to communicate about any failures is the breeding ground for unresolved disputes.

Most people dealing with minor failures manage to negotiate agreeable solutions, but even small deviations create the potential for major disagreements. Most participants advancing to formal dispute resolution are there for the first time, and have never had to proceed beyond negotiation. They are ill-prepared for the amount of work necessary to defend or prosecute a disputed construction claim.

Each party in a formal dispute will spend a great deal of time assembling its boxes of material, not to mention spending an equivalent amount of time reviewing the other parties' documents. The colossal quantity of documents required in formal dispute resolution is staggering: cardboard box after cardboard box of documents required by the contract, and even more boxes of documents specific to the operations of each party. These boxes are full of copies of all contracts, subcontracts, contract reconciliations, RFIs, supplementary instructions, change orders, CCDs, job notes... you get the idea.

The best time to plan for failures is before the contract is signed. Agreement should be reached concerning the timeliness and form of notice requirements and the period for making any claims. Both parties should agree on the method of dispute resolution. Partnering and Dispute Review Boards (DRBs) are methods for avoiding large, unresolved disputes. Mediation, arbitration, and (if necessary) litigation are means to resolve disputes.

Besides day-to-day operations that deal routinely with minor failures, there are, once in a while, major unresolved disputes. Parties that deal most successfully with large disputes:

  1. Determine the facts with their staff and discuss position and options with their attorney.
  2. Discuss negotiation strategy with .an attorney experienced in construction.
  3. Attempt to negotiate good faith solutions with the other party (or parties), face to face.
  4. If negotiation fails, have their attorneys attempt to negotiate a settlement.
  5. If the attorneys fail, prepare for non-binding mediation.
  6. If mediation fails, prepare for contract requirements of arbitration or litigation.

The goal is not to get to Steps 5 and 6. At that point, everyone will spend a lot of money to get any kind of resolution. There will never be a perfect project, but it should always be the goal. The greater the effort to achieve the perfect project, the less likely there will be large and costly disputes.

Ronald N. Eakin, FCSI, CDT, is principal at Ronald N. Eakin, Ltd., Consultants for Construction. He has owned and been employed by general construction companies, and has been a member of the Construction Specifications Institute (CSI) since 1983, serving as an institute vice president in 2002.

Reprinted with permission of The Construction Specifications Institute, 99 Canal Center Plaza, Suite 300, Alexandria, VA 22314, from the Construction Specifier.

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