Tag Archives: document

Follow your Change Order Requirements

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 check markIt is extremely important that you follow your written contract requirements.  No where is this more evident than in the change order process.

Most contracts have an explicit provision for the payment for additional work– and they generally require a written, signed change order (or change directive) before the work is performed.  Can you get by with verbal agreements for additional work? Sometimes yes, sometimes no.  Will it be much harder to get paid for additional services without a signed change order? You bet.  So why put yourself through that trouble?

Often times parties begin to “waive” formal requirements for written change orders, and construction projects are often on tight deadlines where stopping work to get a fully executed change order would bog down the schedule.  However, you run the risk of throwing yourself on the mercy of the Court when you don’t play by the contract rules.

A new case out of the Eastern District of Virginia demonstrates this fact very clearly.  In Artistic Stone v. Safeco, 2010 WL 2977894 (E.D.Va July 27, 2010), the Court held that the requirement that change orders be in writing was to be strictly construed and the subcontractor in that case could not recover for verbal change orders that violated the written change order requirement.  The Court held that where there is a method to ensure recovery of additional extra work in the written contract, the subcontractor could not recover additional money when it failed to follow that method.

“Written change order requirements maintain order and predictability in the construction business, and are meant ‘to avoid subsequent disagreement, and prevent just such a controversy as has arisen in this case.  For this reason, ‘where there is a method under the contract by which a party can insure the recovery of the cost of extra work, that party is not entitled to recovery where it fails to follow that method.'” Artistic Stone Crafters at 5.   [Internal citations omitted.]

A North Carolina court would likely concur.

To ensure you can fully recover for extra work, make sure it is authorized.  Follow the contract.  If circumstances make it so you cannot always follow the contract terms, document the situation as best as you can.  A follow-up email, confirming a verbal change order, would at least provide written evidence you can present in Court, should it come to that.  Otherwise, arguments can and will be made that the person who gave the change order wasn’t authorized to do so, and you may be stuck with no recovery for the extra work.

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Photo “white check mark on blue- acrylic on canvas” by kylemac via Flickr via Creative Commons license.

Tues Tip | NC HUB Requirements for state construction projects

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If you bid on state work in North Carolina, or want to, you should be aware of the Office for Historically Underutilized Businesses (HUB).   [You should also be aware that there may be changes coming soon in light of a recent 4th Circuit Decision with regard to who still qualifies as a HUB.]

Historically Underutilized Businesses logo

1.  What does the HUB office do?

The HUB office is set up to:

  • help qualifying companies become listed vendors in their database
  • help contractors find HUB companies to solicit subcontractor bids from
  • answer questions about the HUB process for bidders

2.  Who qualifies as a HUB business?

By statute, a HUB business is one in which at least 51% ownership and control is held by minorities, women, disabled, and/or disadvantaged owners.  If you think you qualify, get certified! It can only give you more opportunities for public work.

3.  If I bid on a state contract, how do I comply with the HUB requirements?

Under the HUB statute, each bidder must do one of the following:

  •  identify on his bid the minority businesses that will be used and for what percentage of the contract;
  • sign an affidavit and provide documentation listing the good faith efforts to comply [see below]; or
  • sign an affidavit that all work will be self-performed

4.  What activities qualify as “good faith efforts” to identify a HUB subcontractor?

The statute provides that good faith efforts include:

(1)        Contacting minority businesses that reasonably could have been expected to submit a quote and that were known to the contractor or available on State or local government maintained lists at least 10 days before the bid or proposal date and notifying them of the nature and scope of the work to be performed.

(2)        Making the construction plans, specifications and requirements available for review by prospective minority businesses, or providing these documents to them at least 10 days before the bid or proposals are due.

(3)        Breaking down or combining elements of work into economically feasible units to facilitate minority participation.

(4)        Working with minority trade, community, or contractor organizations identified by the Office of Historically Underutilized Businesses and included in the bid documents that provide assistance in recruitment of minority businesses.

(5)        Attending any prebid meetings scheduled by the public owner.

(6)        Providing assistance in getting required bonding or insurance or providing alternatives to bonding or insurance for subcontractors.

(7)        Negotiating in good faith with interested minority businesses and not rejecting them as unqualified without sound reasons based on their capabilities. Any rejection of a minority business based on lack of qualification should have the reasons documented in writing.

(8)        Providing assistance to an otherwise qualified minority business in need of equipment, loan capital, lines of credit, or joint pay agreements to secure loans, supplies, or letters of credit, including waiving credit that is ordinarily required. Assisting minority businesses in obtaining the same unit pricing with the bidder’s suppliers in order to help minority businesses in establishing credit.

(9)        Negotiating joint venture and partnership arrangements with minority businesses in order to increase opportunities for minority business participation on a public construction or repair project when possible.

(10)      Providing quick pay agreements and policies to enable minority contractors and suppliers to meet cash‑flow demands.

Depending on which public entity is involved, different weight may be assigned to different parts of this criteria, or additional criteria may be required.

5.  What documentation is necessary to prove good faith efforts?

The short answer is, “it depends”.  The statute requires “all” documentation be provided.  If you are telephoning minority businesses and getting verbal denials, you must find a way to document that.  Better practice would be to send written requests for bids to HUB-certified businesses, so you can maintain a copy for submission with your bid.

6.  Is the HUB process related to my local MBE/WBE [Minority-owned/Women-owned  Business Enterprise] certification?

As of last summer, there is now a statewide process to getting certified, the Statewide Uniform Certification (SWUC).  This change was made to streamline and centralize the HUB certification process and HUB database.

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Logo from NCDOA HUB website.

 

How to Smartly Handle Project Documents

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mountain of construction paperwork

Paperwork by luxomedia via Flickr

In the Contract Risks Management Group on LinkedIn, L.H. Chin wrote an article about file keeping for contract risk management.  Basically, his premise is that if you cannot keep your Project files orderly, you have exponentially increased your chances of a problem later.   His particular example dealt with originals versus reproduced copies, which is only somewhat germane to North Carolina contracts.  (Here, copies can be used as evidence most of the time—though not always).  His main point, however, about the ability to minimize future risks by having good document control policies in place, is something every project manager should think about.

 Here are a few tips of my own in that regard:

1.   File all communications in one place.  Don’t keep faxes in one file, email in another, and letters in a third.  Don’t keep incoming and outgoing correspondence separated by vendor.  Keep it all in one chronological file.  If you ever find yourself needing legal assistance, this will save many hours and untold stress for everybody.

1.b.  Caveat:  don’t feel like you need to print out every email.  Do, however, maintain a separate email e-folder for the Project, and go ahead and print those really crucial, smoking gun emails.

2.  If you insist on violating Rule 1 (and I know those of you who read this blog would never consider such a thing, right?):  Have all the files, categories, and such you want, but please also make a “master” chronological file of all correspondence.   Just do it.

3.  If you have any communications with your lawyer, an insurance representative (outside of the normal bonding paperwork), or otherwise have documents relating to potential claims, do keep them separate.  Put all such correspondence, in a folder marked “legal,” away from the Project file to prevent inadvertent disclosure to anyone else if there is ever litigation on the matter.

3.b  If in doubt whether something should be in “legal” or “correspondence”, err on the side of “legal.”  Your attorney can always change the classification later, but she can’t put the genie back in the bottle if something that is privileged is mistakenly given to a party suing you.

If you have any questions about these tips, or want to discuss your current procedure for record management, shoot me an email.  My contact information can be found on my Firm bio or at the Footer of the Blog.  Or, you can simply leave me a note in the comments. 
 

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Photo: “Paperwork” by luxomedia via Flickr/CC license.

ConsensusDOCS- are they an improvement over AIA construction contracts?

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Have you had occasion to use the (relatively) new ConsensusDOCS? Having just completed my manuscript for the North Carolina Construction Law seminar I’m speaking at in May, I’ve been spending a lot of time comparing the American Institute of Architect’s standard contract general conditions, the AIA A201 (2007) to the ConsensusDOCS 200 (2007) and the Engineering Joint Contracts Document Committee (EJCDC) standard general conditions of the contract, C-700 (2007).

I haven’t yet seen litigation over the ConsensusDOCS, so how courts will interpret its provisions remains to be seen. One major difference: the ConsensusDOCS do diminish some of the architect/design professional’s role on the project.

For example, in the change order process, instead of the architect being involved in the contract price and time adjustment (see AIA A201 Section 7.2.1), the ConsensusDOCS 200 calls for the owner and contractor to negotiate in good faith. No mention is made of the design professional’s role. (See 8.1.2).

If you’ve had occasion to work under the ConsensusDOCS, drop me a line and tell me the advantages and disadvantages over other form contracts.

Spring Cleaning: 6 Contract law tips for limiting risk on construction projects

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cleaning suppliesIt’s springtime! That means spring cleaning. Out with the old and in with the new. This is also a good time to think about cleaning up your systems for limiting your risk on construction projects. Here are a few short things to consider as you attempt to improve your construction contracts:

  1. Do you have a standard written contract or proposal for every project, no matter how small or how long the client has been doing business with your company? This should be your number one priority. If it is a standard form, it shouldn’t be a big deal to use even on short projects. And if you think your longtime customers will be offended, blame it on the attorneys! That’s what construction attorneys are here for– we’re tough and can take being the bad guys.
  2. Has your contract or proposal been reviewed by your insurance carrier? This is an important step you can take to limit any risk issues in your contract. Many insurance carriers will review your contracts at no cost to you– they view it as a good loss prevention measure. Check with your insurance agent or broker to see if your carrier offers this service. This is also a good time to see if your insurance coverage is sufficient for the amount of work you are currently performing.
  3. Has your contract been reviewed by your attorney? If your insurance carrier has an attorney licensed in your jurisdiction review your contract, you can skip this step. Otherwise, strongly consider having the contract reviewed by a professional, preferably an insurance defense attorney. Measure twice and cut once applies to the legal world, too.
  4. Does everyone on your staff know to use the contract or form proposal and where on your system to find it? It does you no good to have a great contract template that some of your employees don’t use. Educate them on the importance of all contracts and proposals being produced in a uniform, systematic way.
  5. Is there a follow up procedure in place, in case a construction contract or proposal is not returned executed by the client? Someone should be tasked with making sure a completely executed contract or signed proposal is obtained, and that it is filed in an easily accessible location for future reference. One idea: do not open a new client or matter number to bill against until the contract is in place.
  6. Consider whether it is worth getting current verbal agreements translated into written agreements. If you have an ongoing project that is only based on a verbal agreement, consider the potential for risk on that project. It might be worth it to ask the client to execute a new written agreement. Again, you can blame it on the lawyers. This *may* not be possible, or it may simply be too awkward to ask for this in the middle of a project that is going well. But at least consider all of your current projects to see if this is a possibility.

Happy Spring Cleaning!

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Photo “Kane Cleaning  Supplies”  by Collin Anderson via Flickr via Creative Commons License