Owners: Here Are Five Ways To Ensure Project Failure

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[author: Timothy R. Hughes, Esquire]

Owners and owners’ representatives often fail to follow certain basics that can lead to major problems with their projects.  If you are interested in making sure your project is a disaster, here are five sure fire techniques.

1.  Mistake Price for Value

In today’s economy, margins are clearly tight and price is a major factor.  Still, simply picking the cheapest contractor or consultant without regards to quality, experienceand talent is a mistake.  Low bids often hide mistakes or are a harbinger of aggressive change orders coming.  Hiring the cheapest civil engineer may save a little bit of money initially but ultimately could end up costing you during a rocky entitlement process.  The cheapest architect may expose you to more claims and lack of coordination.  Focusing on value across the entirety of the project as opposed to strictly price will translate to greater success and less risk.

2.  Have Poor/Uncoordinated/Unexecuted Contracts

Having weak contracts, or contracts that are not coordinated with each other, invites disputes and risk.  Having no signed contracts is even worse.  It sounds hard to believe, but I have had many cases where the actual contracts were never signed leading to major fights over what the terms actually were.  Starting work without signed agreements happens with some frequency, as does litigation on those projects.  It is better by far to understand that contract negotiations are an important element in setting expectations and talking through potential snags before work starts.

3.  Thoughtlessly Sign Boilerplate

Thoughtlessly signing the other side’s boilerplate contract forms is an invitation to disaster.  This is not to say it is always wrong to sign the other side’s contract, but it should be reviewed and understood in detail.  For example, if you are agreeing to limitations of liability in design contracts, you should know and understand what that means practically.  It is equally risky to sign other boilerplate forms without considering the details.  This extends to change orders, acceptance of work, releases and other documents.

4.  Take Your Hands off the Wheel

Even with project management or design professionals involved, the owner can and should stay engaged.  Adhering to best practices and having processes established helps reduce risk.  This is even more true when the owner is more actively managing the trades or the project.  If you get disengaged and there is a problem, you can expect a difficult time unraveling what happened.  Far better to stay organized and on top of the project and thus reduce risk.  It is worth the time.

5.  Fail to Document

This is the mother of all unforced errors.  The complexity of construction projects, the schedule pressures, and the many moving parts mean there are many communications.  You need to have a process to ensure orderly communication, prompt and accurate decision making and clear documentation of all decisions.  I cannot count how many cases have involved a critical decision that is purely verbal and thus left to chance in litigation.  More importantly, timely documentation ensures everyone is on the same page to avoid problems.

Conclusion

As basic as these points seems to be, they directly flow from 20 years of construction litigation practice.  I often get a file and say, “I have seen this movie before,” purely because the case involves one of the failures above.  If you avoid these top five issues, you will eliminate some of the most basic points of failure of construction projects.

Timothy R. Hughes is a Shareholder in the law firm of Bean, Kinney & Korman in Arlington, Virginia and lead editor of the firm’s blog at http://www.valanduseconstructionlaw.com. He represents clients in construction and commercial litigation, and corporate, contracts, and general business matters. He can be reached by e-mail at thughes@beankinney.com and by phone at 703-525-4000.

Published In: General Business Updates, Construction Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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