Contract change order limitations

Change order limitations are sometimes imposed on public works contracts by statute, regulation or the contract itself. The underlying policy is to protect the project budget and the integrity of the public procurement process by limiting the expansion of the contractual scope of work. A limitation typically states that if the estimated cost of a change order exceeds a certain percentage of the original contract price, the additional work must be put out to bid.   Change order limitations can lead to devious tactics, however. In a recent California case a public project owner and its construction manager tried to circumvent a ten percent limit in a site work contract in order to avoid the delay of competitive bidding. New grading work was to be added to the general building contract and the building contractor would sub the work to the site contractor.     The project owner never amended the building contract and the building contractor wouldn’t pay the site contractor fo ... Read the rest of entry »

Disclosure of Superior Information

The concept of “superior knowledge” or “superior information” is unique to construction contracting. Contract law in general holds a party responsible for intentionally withholding significant information in order to mislead the other party. This is usually characterized as “fraudulent misrepresentation” or “fraudulent inducement.”  With construction contracting, a project owner may be liable to a contractor for failing to disclose significant information even though the nondisclosure was not intentional or fraudulent. The California Supreme Court recently issued an important decision on nondisclosure of superior information by public project owners. If a public project owner (1) possesses information which will affect the contractor’s bid price or performance cost; (2) knows the contractor does not possess that information; and (3) includes nothing in the contract documents which would cause the contractor to inquire about the information; then ... Read the rest of entry »

Fixed Price Contracts

From one of my favorite email blogs -  The Construction Claims Advisor. A fixed-price construction contract is usually just that. Sometimes, however, prices for materials or commodities such as asphalt or fuel are stipulated in the bid documents, with payment to the contractor adjusted to reflect the actual costs indicated in periodic published indexes. From a project owner’s point of view, a price adjustment clause promotes accurate bidding. Bidders are not forced, or allowed, to speculate on future costs. There is no need for bidders to carry large contingencies as protection against volatile swings in cost. And of course for the successful bidder these features reduce the risk and uncertainty of contract performance. In order for price adjustment clauses to work fairly and effectively, however, they must tie adjustments to the contractor’s real costs. The Mississippi Supreme Court recently struck a provision from a state highway contract because it froze “actual” costs ... Read the rest of entry »

How quickly time passes

What happened to the plain white business card with a name and number clearly printed on the front? How quickly time passes – it’s already been over five years since we had our “new” web site designed.  At this point, I struggle to even remember what our old site looked like, let alone how it performed.  However simple it may have been, it certainly served the purpose of the time. Although we’ve have a good run with the current site, it’s once again time for not only a refreshed look, but upgrade in performance.  I’ve always tried to exceed expectations not only in the field with quality and schedule, but also in the office with the level of detail and accuracy we provide for any given program.  The new site is a great new tool as we move into the next generation of the custom home market. With the new site I’ve put more emphasis on our Owner Representation services as well as some extensive upgrades to the back end Client interface system ... Read the rest of entry »

The Role of the Owners Representative

Construction contracts are rife with requirements that the contractor provide the owner or owner's representative with written notice of occurrences: delay, changed work, unforeseen site conditions, anything that can lead to a contractor's claim for relief under the contract. The issue which arises time after time is whether the contractor's failure to provide timely written notice deprives the contractor of a remedy. Usually, if the project owner had actual knowledge of the occurrence and was not denied any legal or practical options, the owner cannot use lack of written notice against the contractor. Differing site conditions, however, are a challenge in this regard. Once a physical condition has been disturbed or work has continued, the owner's ability to respond to the situation may have been compromised. Notice requirement are more strictly enforced in this context. This was illustrated in a recent Kansas case. The contractor failed to provide timely written notice of ground water conditions, but conte ... Read the rest of entry »

Discussion on the role of Owner's Representative

Many milestones in a construction project are established or acknowledged through certification by a third party designated by the project owner. This individual, stipulated in the construction contract, is typically the project architect or engineer. It may be a different owner's representative. But the operative word is owner's representative. The denial of certification or a delay in certification can be very costly for a contractor. The contractor, however, has very little influence over or leverage with the certifier. The certifier is the agent of the owner with a duty to protect the owner's interests. The certifier has few obligations to the contractor, possibly just the obligation to avoid bad faith or fraud. The nature of this relationship was illustrated in a couple of recent court opinions, one involving a project engineer and the other a construction manager. In both cases it was ruled that the owner's representative could not be sued by a contractor for delay damages allegedly incurred as a resu ... Read the rest of entry »

Andiamo

If you haven't been to Big Sky in a while - not only has the skiing been great, the dining at Andiamos Restaurant is exceptional.  If you're looking for a unique dining atmosphere, check out this design/build project by RMR Group.

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The Dirty Project

It's hard to believe spring is already knocking on the door. We don't have a lot of work this spring, but we're feeling quite fortunate to have what we do. It was almost a year ago to date when I wrote in our newsletter about how great it was to have good clients that were excited to get under construction last spring. Somehow we are in the same boat again this year - great clients and great projects (just not many of them). We've bid several residential projects over the winter with a myriad of General Contractors, where the winning bid has been around 30% lower than the median average bid. For the majority of the projects we've observed, the low bidder has predominantly been awarded no matter what the average of the bids have been. When the winning bid is below the actual cost of the "sticks and bricks" of the project - undoubtedly it's only a matter of time before there is a problem. Welcome to "the Dirty Project"... We saw a little bit of the fallout in 2009 with low bidder contractors front loading p ... Read the rest of entry »

How log will the low mortgage rates last?

March 31 loomed for months as the day when the U.S. Treasury would stop purchasing $1.25 trillion worth of mortgage-backed securities and effectively remove a major support to the fragile housing market.

But now that the program has ended, economists interviewed by BUILDER suggest that builders-and others involved in the housing market-don't need to panic. "This has been so well advertised," says Scott J. Brown, chief economist for Raymond James & Associates in St. Petersburg, Fla. "Investors have had plenty of time to get used to it. The Fed has been gradually unwinding its liquidity programs. ... This is just one more step toward getting back to equilibrium."

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How will the custom home market change in the next 10 years?

Around the year 500 B.C., the Greek philosopher Heraclitus said, "Nothing endures but change." Over the centuries his wisdom has proven correct time and again-except, for the most part, in the field of custom home building. True, new developments have taken place in materials science, mechanical systems, and building products, but generally speaking, the way a custom home comes together hasn't changed much in the past 100 years. The home building industry has always moved very, very slowly," says timber-frame guru Tedd Benson of Bensonwood Homes in Walpole, N.H., who for years has been calling on his fellow builders to evolve more quickly.  "Historically, it moved even more slowly.  It was the same for about a thousand years, and then there were many changes at the end of the 19th century and in the first part of the 20th century-mostly concerning the integration of various mechanical systems."  Custom builders tend to be skeptical of anything new, and with good reason: Plenty of unproven prod ... Read the rest of entry »